New Governance in European Social Policy: The Open Method of Coordination (Palgrave Studies in European Union Politics)

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New Governance in European Social Policy The Open Method of Coordination

Milena Büchs

Palgrave Studies in European Union Politics Edited by: Michelle Egan, American University USA, Neill Nugent, Manchester Metropolitan University, UK, William Paterson, University of Birmingham, UK Editorial Board: Christopher Hill, Cambridge, UK, Simon Hix, London School of Economics, UK, Mark Pollack, Temple University, USA, Kalypso Nicolaïdis, Oxford UK, Morten Egeberg, University of Oslo, Norway, Amy Verdun, University of Victoria, Canada, Claudio M. Radaelli, University of Exeter, UK, Frank Schimmelfennig, Swiss Federal Institute of Technology, Switzerland Palgrave Macmillan is delighted to announce the launch of a new book series on the European Union. Following on the sustained success of the acclaimed European Union Series, which essentially publishes research-based textbooks, Palgrave Studies in European Union Politics will publish research-driven monographs. The remit of the series is broadly defined, both in terms of subject and academic discipline. All topics of significance concerning the nature and operation of the European Union potentially fall within the scope of the series. The series is multidisciplinary to reflect the growing importance of the EU as a political and social phenomenon. We will welcome submissions from the areas of political studies, international relations, political economy, public and social policy and sociology Titles include: Ian Bache and Andrew Jordan (editors) THE EUROPEANIZATION OF BRITISH POLITICS Derek Beach and Colette Mazzucelli (editors) LEADERSHIP IN THE BIG BANGS OF EUROPEAN INTEGRATION Milena Büchs NEW GOVERNANCE IN EUROPEAN SOCIAL POLICY The Open Method of Coordination Morten Egeberg (editor) MULTILEVEL UNION ADMINISTRATION The Transformation of Executive Politics in Europe Stefan Gänzle and Allen G. Sens (editors) THE CHANGING POLITICS OF EUROPEAN SECURITY Europe Alone? Isabelle Garzon REFORMING THE COMMON AGRICULTURAL POLICY History of a Paradigm Change Heather Grabbe THE EU’S TRANSFORMATIVE POWER Katie verlin Laatikainen and Karen E. Smith (editors) THE EUROPEAN UNION AND THE UNITED NATIONS Esra LaGro and Knud Erik Jørgensen (editors) TURKEY AND THE EUROPEAN UNION Prospects for a Difficult Encounter Paul G.Lewis and Zdenka Mansfeldová (editors) THE EUROPEAN UNION AND PARTY POLITICS IN CENTRAL AND EASTERN EUROPE Hartmut Mayer and Henri Vogt (editors) A RESPONSIBLE EUROPE? Ethical Foundations of EU External Affairs Lauren M. McLaren IDENTITY, INTERESTS AND ATTITUDES TO EUROPEAN INTEGRATION

Christoph O. Meyer, Ingo Linsenmann and Wolfgang Wessels (editors) ECONOMIC GOVERNMENT OF THE EU A Balance Sheet of New Modes of Policy Coordination Frank Schimmelfennig, Stefan Engert and Heiko Knobel INTERNATIONAL SOCIALIZATION IN EUROPE European Organizations, Political Conditionality and Democratic Change Justus Schönlau DRAFTING THE EU CHARTER Rights, Legitimacy and Process Palgrave Studies in European Union Politics Series Standing Order ISBN 1-4039-9511-7 (hardback) and ISBN 1-4039-9512-5 (paperback) You can receive future titles in this series as they are published by placing a standing order. Please contact your bookseller or, in case of difficulty, write to us at the address below with your name and address, the title of the series and one of the ISBNs quoted above. Customer Services Department, Macmillan Distribution Ltd, Houndmills, Basingstoke, Hampshire RG21 6XS, England

New Governance in European Social Policy The Open Method of Coordination

Milena Büchs School of Social Sciences University of Southampton, UK

© Milena Büchs 2007 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1T 4LP. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted her right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2007 by PALGRAVE MACMILLAN Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N.Y. 10010 Companies and representatives throughout the world PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St. Martin’s Press, LLC and of Palgrave Macmillan Ltd. Macmillan® is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN-13: 978-0-230-50651-0 ISBN-10: 0-230-50651-8

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This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Buchs, Milena, 1977– New governance in European social policy : the open method of coordination / Milena Büchs. p. cm. Includes bibliographical references and index. ISBN 0–230–50651–8 (alk. paper) 1. Europe—Social policy. 2. Social policy—International cooperation. I. Title. HN373.5.B83 2007 320.6094—dc22 2007022506 10 16

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Printed and bound in Great Britain by Antony Rowe Ltd, Chippenham and Eastbourne

To Ulrike and Berthold

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Contents

List of Boxes, Figures and Tables

ix

List of Abbreviations

x

Acknowledgements

1

Introduction: New Governance and the Dilemma of European Union Social Policy The OMC’s governance character The OMC as a response to the dilemma of European social policy Organization of the book

Part I 2

3

The Open Method of Coordination

Conceptualizing the OMC ‘Influence’ in OMC research Theorizing the OMC’s influence and effectiveness ‘Invited dutifulness’ Defining the OMC agenda Typology of responses Framework for analysing member state responses The ‘Third Way’ in European Social Policy The ‘third way’ The ‘European Social Model’ The policy content of the Open Methods of Coordination

Part II 4

xii

Member State Responses

Institutions and Actors ‘Goodness of fit’ Political system and actor constellations Social partners and NGOs NAP production Relationship to the EU vii

1 3 6 13 17 19 20 22 26 27 31 33 39 40 42 44 57 59 59 64 65 67 69

viii

5

Contents

The European Employment Strategy in Germany and the United Kingdom Labour market policy development in Germany and the UK Responses to the EES Explaining variation

Part III 6

7

8

Evaluation

Effectiveness Evaluation framework The OMC’s effectiveness Legitimacy Democratic quality of OMC processes Legitimacy of the OMC Conclusion Social Europe and the OMC ‘Invited dutifulness’ and its problems Reforming the OMC?

Appendix List of interviews Overview: Policy actors’ positions and ways in which they refer to the EES

72 72 79 89 95 97 97 100 130 131 140 152 152 155 157 161 161 163

Notes

168

References

177

Index

200

List of Boxes, Figures and Tables List of Boxes 3.1 Integrated Guidelines, 2005–2008 3.2 Quantitative targets in the European Employment Strategy 3.3 Common objectives for the OMC in social inclusion and social protection

46 49 53

Figures 6.1 Coefficient of variation for employment rates 6.2 Coefficient of variation for unemployment rates 6.3 Dispersion of regional unemployment in the EU-25

118 119 119

Tables 2.1 Factors in explaining member state responses 4.1 Employment rates in Germany and the UK (%) 4.2 Performance regarding EES targets in Germany and the United Kingdom 4.3 Contextual factors in Germany and the United Kingdom 6.1 Criteria for evaluating the OMC 6.2 Quantitative employment strategy targets and current achievement

ix

35 61 61 71 99 109

List of Abbreviations ALMP BDA BDI CBI CDU CSU DfES DGB DIHK DTI DWP EEC EES EIRO EMU ESF EU FDP GDP IMF JSA NAP ND NGO NUTS OECD OMC OSE PDS SGB SGP SPD

Active Labour Market Policy Bundesvereinigung der deutschen Arbeitgeberverbände (Confederation of German Employers’ Associations) Bundesverband der deutschen Industrie (Confederation of German Industries) Confederation of British Industry Christlich Demokratische Union (Christian Democratic Union) Christlich Soziale Union (Christian Social Union) Department for Education and Skills Deutscher Gewerkschaftsbund (German Federation of Trade Unions) Deutscher Industrie- und Handelskammertag (German Chamber of Industry and Commerce) Department of Trade and Industry Department for Work and Pensions European Economic Community European Employment Strategy European Industrial Relations Observatory European Monetary Union European Social Fund European Union Freie Demokratische Partei (Liberal Democratic Party of Germany) Gross Domestic Product International Monetary Fund Job Seekers’ Allowance National Action Plan New Deal Non Governmental Organization Nomenclature of Territorial Units for Statistics Organisation for Economic Cooperation and Development Open Method of Coordination Observatoire sociale européen (European Social Observatory) Partei des Demokratischen Sozialismus (Democratic Socialist Party) Sozialgesetzbuch (Social Security Code) Stability and Growth Pact Sozialdemokratische Partei Deutschlands (Social Democratic Party of Germany) x

List of Abbreviations

TEC TUC UN UNICE US

xi

Treaty of the European Communities Trades Union Congress United Nations Union des industries de la communauté européenne (Union of Industrial and Employers’ Confederations in Europe) United States

Acknowledgements This book is the product of a long, exciting but at times also bumpy journey of exploring the Open Method of Coordination in European social policy which started off in 2002. Numerous people and institutions supported me in undertaking this research and I wish to sincerely thank all of them. First of all, this study, based on a PhD thesis, was funded by a Marie Curie Fellowship at the Centre of Comparative Research in Social Welfare, University of Stirling (2002–2003) and by a fellowship of the doctoral excellence scheme of the Land Berlin-Brandenburg1 (2003–2005). The Observatoire sociale européen in Brussels also financially supported parts of the empirical research. Conference grants from the American Law and Society Association (LSA) and the Foreign Office of the HumboldtUniversity Berlin enabled me to attend the LSA graduate workshop in Vancouver in 2002 and to present my work at the LSA conference in Pittsburgh in 2003. A great ‘thank you’ goes to Claus Offe who oversaw this study as my PhD supervisor from the beginning to the end. I profited immensely from his generous support and the vibrant multidisciplinary research atmosphere he created in his colloquium and seminars. Jochen Clasen also played a crucial role as my co-PhD supervisor. Our insightful conversations during and subsequent to my stay at Stirling University were invaluable for this study and I wish to thank for all his help. Furthermore, my work on the OMC is greatly influenced by colleagues participating in a cross-Atlantic book project on the Open Method of Coordination (Zeitlin and Pochet et al. 2005) organized by the European Union Center of Excellence of the University Wisconsin-Madison and the Observatoire sociale européen in Brussels. I am indebted to various colleagues and friends who generously commented on earlier versions of chapters as well as related presentations and papers. Karen Anderson, Andreas Aust, Jean-Claude Barbier, Ute Behning, Christian Boulanger, Emma Carmel, Eugénia da Conceição-Heldt, Judith Dick, Ana Guillén, Cosmo Howard, Ellen Immergut, Kerstin Jacobsson, Sigrun Kahl, Stein Kuhnle, Wolfram Lamping, Deborah Mabbett, Reinhard Penz, Philippe Pochet, Caroline de la Porte, Anu Rafi, Diane Sainsbury, Noel Whiteside, Georg Vobruba, Kirsten Wiese and Michael xii

Acknowledgements

xiii

Wrase provided me with helpful feedback and questions at various workshops, conferences and seminars. Particularly useful and influential were the comments from colleagues and friends on earlier papers on the OMC, the PhD thesis and draft chapters for the book. Here I wish to thank Christian Brütt, Bernard Casey, Graham Crow, Dawid Friedrich, Linda Hantrais, Bernard Harris, Christian Joerges, Manfred Köhnen, Sandra Kröger, David Lehrer, Colin Lindsay, Michael Maschke, Jan-Henrik Meyer, Traute Meyer, Álvaro Morcillo-Laiz, Thomas Pfister, Silke Roth, David Trubek, Waltraut Schelkle and Jonathan Zeitlin. In addition, I profited from the extraordinary friendly atmosphere, encouragement and helpfulness of many colleagues at the University of Southampton in the actual process of writing the book. Several colleagues mentioned above provided me with useful advice and comments on chapters and parts of the book. Derek McGhee did a fabulous job in reading through the whole manuscript. Alison Howson, Amy Lankester-Owen, Gemma d’Arcy Hughes and the editors of the Studies in European Union Politics Series from Palgrave Macmillan provided immensely helpful comments and advice in writing and producing the book. Special thanks are also due to my interviewees in Germany, the United Kingdom and from the EU Commission as well as to various other persons who generously provided me with information, material and practical and technical advice. A range of people helped me to transform earlier papers and drafts written in Teutonic English into (hopefully) better readable texts, particularly Anthony Shop, Scott Nicholas Siegel, Amy Metzger, Kayla Keenan, David Lehrer, Gemma Miller, and Clara Morris. Finally, this book would not have been written without the patience, understanding and encouragement by my friends and relatives; special thanks to Anne Weihe and my brother Malte Büchs for many warming cups of tea and phone-calls across the channel as well as to Manfred Köhnen for keeping me reminded of those things that are more important than ‘the book’. All shortfalls and errors remain, of course, my responsibility. I dedicate the book to my parents from whom I am still learning how to be curious, fascinated and critical.

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1 Introduction: New Governance and the Dilemma of European Union Social Policy

This book explores current problems in European social policy.1 It does so by examining a new governance method in European Union (EU) social policy known as the Open Method of Coordination (OMC). At first glance, the OMC might appear to be merely a marginally significant EU policy instrument as it is not legally binding and has been largely neglected in broader public debates. However, the introduction of the OMC in the late 1990s and the problems that are surrounding it are symptomatic of the difficulties with which EU and national social policy are confronted. A detailed investigation of the reasons behind the OMC’s introduction, aims and contradiction, along with its implementation at the member state level is therefore crucial. This investigation is hence the purpose of this book. It primarily argues that the OMC was designed to be a response to a complex and conflict-ridden situation within EU social policy but has not proven to be a viable solution to these problems. This is due to the OMC’s governance instruments as well as its contradictory policy agenda. Moreover, this book claims that the OMC creates new problems related to effectiveness and legitimacy. The fundamental difficulties with which EU social policy is confronted can be summarised as follows. On one hand, the EU’s single market agenda, or ‘negative integration’, limits national governments’ de facto autonomy in designing their welfare systems. During the last two decades, the welfare state experienced retrenchment, recalibration and reorganisation. Whilst the exact role of EU integration for welfare state retrenchment remains unclear, it is widely perceived to be a significant reason for these developments. Several academics, as well as national and EU politicians, are consequently promoting a strengthening of EU social policy by arguing that this would prevent a ‘race-to-the-bottom’ of social standards and facilitate the development of coordinated responses to common 1

2

Introduction

problems. Furthermore, they argue that a stronger EU role in social policy would increase the legitimacy of EU integration by preventing electorates from increasingly perceiving European integration as detrimental to existing national welfare systems. If this were to occur, it may cause a European backlash that poses a threat to political stability and social cohesion. On the other hand, member state governments strongly oppose shifting further social policy competencies upwards to the EU and wish to retain the power to design their own welfare systems. One argument that is frequently used to support this perspective maintains that centralised and harmonised EU social policies cannot accommodate the enormous diversity of welfare systems, economic and social contexts in the member states. To summarise, the problem is that whilst there are several good reasons for strengthening the EU’s role in social policy, the prospects of realising this are slim due to a range of political and institutional hindrances. This situation requires a ‘middle-way’ response that manages to bring social and economic objectives – or ‘negative’ and ‘positive integration’ (Scharpf 1999: 43ff.) – at the EU level into balance without stripping member states of their authority within social policy and centrally imposing a ‘one-size-fits-all’ social policy design. The OMC promises to provide exactly this kind of compromise response to the current dilemma of European social policy. Particularly in the OMC’s early years, the majority of academic commentators were very optimistic that it could provide an innovative governance model for European social policy (e.g. Kenner 1999; Gerstenberg and Sabel 2002; Trubek and Mosher 2003; Eberlein and Kerwer 2004; Jacobsson 2004b; e.g. Zeitlin 2005b). Many authors believe that the OMC can be effective in achieving its social policy objectives, leading to a convergence of social policy approaches and outcomes across the member states and strengthening ‘social Europe’ overall. This is based on the assumption that the OMC will contribute to ‘policy learning’ on either a ‘peer pressure’ basis or voluntarily, by which policy actors adopt similar concepts through deliberation and participation in European policy networks. Moreover, optimistic accounts of the OMC claim that it will improve the democratic quality of social policy-making at the European and national levels as it provides for direct participation of business organizations, trade unions, non-governmental organizations, experts and regional and local authorities within the decision-making and implementation processes of the OMC. This book offers a critical appraisal of the OMC. It systematically analyses the tensions and paradoxes inherent in this method of compromise and concludes that it failed to achieve its aims. This judgement does not

Introduction

3

imply that social policies should be harmonized at the EU level or that they should be left entirely to the authority of member state governments. These two options are not viable as they disregard the complexity and inter-relatedness of national welfare systems in a multi-level economic system such as the EU. However, it is equally difficult to develop a viable ‘method of compromise’ or suitable reform strategies for the OMC. I argue that the tensions and paradoxes within the OMC reflect the dilemmas European social policy is confronted with and that these dilemmas pose a tremendous obstacle to more fundamental reforms of the current policy design of multi-level social policy in the EU. The remainder of this introduction questions whether the OMC can be regarded as a new governance instrument, and explains in more detail the dilemma of European social policy that the OMC seeks to resolve. The last section provides an overview of the book’s organization.

The OMC’s governance character It should be noted that this book applies a broad conception of the ‘Open Method of Coordination’ comprising policy coordination in economic, employment and social policy. However, for purposes of accuracy, I will use the terms ‘European Employment Strategy’ and ‘Economic Policy Coordination’ for the economic and employment related strands of the OMC when not referring to the OMC as a whole. The question as to whether or not the OMC is a new governance method is hotly debated in the OMC literature. Answers depend on the reference point of comparison. If one acknowledges that the EU has used ‘soft’ governance before the OMC was introduced, the OMC does not appear to be so new. If one however emphasises the particular design of the OMC in EU employment and social policy as established in the late 1990s one has to conclude that the OMC presents a new governance method. The majority of OMC authors claims that the OMC is a new governance method. For example, de la Porte & Pochet state that the ‘OMC represents a new form of regulation, that is softer than the classical legalistic approach, but is more than a simple non-binding recommendation or a political declaration’ (De la Porte and Pochet 2002b: 12). Even more radically, Tucker (2003: 1) perceives the OMC as ‘a new vision and . . . revolutionary potential of soft governance in the European Union’.2 Other authors, for instance Schäfer (2006) and Wessels (2003) deny the newness of the OMC emphasising previously existing ‘soft’ governance methods and the application of these methods by other international organisations.

4

Introduction

Whilst it is true that ‘soft’ governance had its place within EU governance before the OMC was introduced I will argue here that the OMC is new because it has not been used in the same way in EU social policy before. The whole range of the EU’s governance methods has been developed and differentiated over time. The EU is neither a federal state nor an international organization but a singular (sui generis) political system. Therefore it developed a range of specific governance methods. Wallace (2005: 79–89), for example, distinguishes five methods: • The ‘traditional Community method’ as a model of ‘supranational’ lawmaking, based on the blueprint of the Common Agricultural Policy. This method comes closest to what de Burca (2000: 1) and Scott & Trubek (2002) have called the ‘Classical Community Method’; • The ‘EU regulatory mode’ where the Commission and the Council set legally binding minimum standards, mainly applied in single market and competition policies; • The ‘EU distributional mode’ involving financial (re)distribution through the EU budget, for example through the structural and cohesion funds; • ‘Intensive transgovernmentalism’ which is basically intergovernmental cooperation in areas outside of the EU’s classical scope such as early monetary, asylum, immigration, foreign and security policy (‘second pillar of the European Union’), and justice and home affairs policies (based on the 1985 Schengen agreement and the ‘third pillar’ of the EU); • And finally, ‘policy coordination’ as a fifth mode of governance. This ‘policy coordination’ method has been used since the 1970s, for example in the fields of environmental, macro- and microeconomic, research and development, and education policy (Wallace 2005: 85). In the last decade, the instruments of this coordination method became more differentiated. In some policy areas it is only loosely applied whereas more rigorous methods are employed in other areas. Already in the early 1990s policy coordination in economic policy has been introduced in a very similar way than it is currently used in EU social policy. The Maastricht Treaty3 established the legal basis for economic policy coordination and gave rise to techniques that feature in today’s social policy OMC such as non legally binding guidelines and recommendations, regular reports by member states and evaluation by the EU. The Treaty of Maastricht also contained a protocol on the excessive deficit procedure

Introduction

5

defining quantitative criteria regarding the annual state deficit and overall public debt as well as a protocol on the convergence criteria including interest, inflation and exchange rates. The member states had to fulfil these criteria to join the monetary union. The protocol on the excessive deficit procedure also asked member states to regularly report ‘their planned and actual deficits’ to the EU Commission. In 1997 the Stability and Growth Pact was introduced serving the implementation of measures to achieve budgetary discipline and stability. According to the Stability and Growth Pact the member states have to draw up annual Stability or Convergence Programmes submitted to the Commission and the Council to monitor performance. Further reporting and surveillance mechanisms have been introduced in internal market policy by the Cardiff European Council in 1998. The European Employment Strategy introduced policy coordination in labour market policy (European Council 1997). The Lisbon Council which launched the ‘Lisbon Strategy’ adopted the term ‘Open Method of Coordination’ and applied this method to social inclusion and social protection (European Council 2000b).4 Since such a complex and reiterative method of policy coordination did not exist in EU social policy before 1997 one can claim that the OMC established a new governance method in EU social policy. This claim has to be specified by further aspects. Firstly, the EU has not ‘invented’ the OMC since governance methods similar to the OMC have been previously used by international organizations such as the IMF and OECD (Casey 2004; Dostal 2004; Schäfer 2006). However, the OECD and IMF strategies are less ‘contextualised’ and more ‘top-down’ orientated while the EU’s OMC is much more a multi-level governance method requiring active and regular input from the member states. Secondly, the ‘soft law’ OMC has not replaced ‘hard law’ EU social policy but it only complements existing binding provisions (Falkner 2006; Kilpatrick forthcoming). To sum up, the OMC is not the only EU governance instrument deviating from the ‘Classical Community Method’ and governance methods similar to the OMC have been used by other international organizations and in other policy fields of the EU before the OMC was adopted in EU employment and social policy. But if one is interested in the development of EU social policy and the difficulties EU policy is confronted with the OMC must be regarded as a new governance method in this field that creates new questions and new problems. This leads us to the question of why this new governance method has been developed. With which situation in European social policy were policy-makers confronted that they agreed to introduce the OMC?

6

Introduction

The OMC as a response to the dilemma of European social policy The development of the OMC is a response to the difficulty that there are several good reasons to strengthen the EU’s role in social policy whilst the prospects of realising this option are slim due to a range of political and institutional hindrances. This section briefly analyses the history of EU social policy and illustrates in more detail the pro and contra arguments related to strengthening EU social policy. When the European Economic Community was founded in 1957, its primary goal was to create a common European market. Social policy objectives were clearly subordinated beneath economic objectives and the EU competencies for creating a common social policy framework were limited. From its inception, however, the European Economic Community (EEC) had the right to issue regulations such as prohibiting the discrimination of workers from other member states on the grounds of nationality, co-ordinating the social security systems for mobile workers, promoting the free movement of labour and gender equality in pay, and setting minimum standards in the area of workplace safety. On the basis of these entitlements, regulations and directives were adopted from the late 1950s onwards. Subsequent treaty amendments, particularly those of 1986 and 1992, gradually expanded the competencies of the European Community to adopt social policy related provisions. 1997 was a watershed for EU social policy when a title on employment policy and further articles on social policy were integrated into the Treaty of Amsterdam.5 In spite of this expansion, the EU’s authority to create social policy remains constrained by several provisions.6 The most significant of these is the principle of subsidiarity (Art. 5, Treaty of the European Communities). According to this principle, the EU is only allowed to adopt regulations when member states are unable to achieve specific policy objectives through their own policies. Moreover, the EU is generally only permitted to ‘support and complement’ member states’ own social policies (Art. 137, 1, Treaty of the European Communities); the harmonization of law and of administrative regulation is explicitly excluded in specific fields;7 several decisions require unanimity;8 and in areas in which national ‘social partners’ play an important role EU institutions are not allowed to take action.9 Gender equality policies adopted by the EU are often regarded as having had an important impact on national policy-making (e.g. Geyer 2000: 104ff.). However, also gender equality regulations do rarely reach beyond the area of employment. Therefore, overall one must emphasise the mainly market-making and regulatory nature of existing

Introduction

7

legally binding EU social policy provisions since they concentrate on providing the conditions for free movement of labour and a ‘level playing field’ in the areas of work environment and occupational safety. One can, however, argue that EU social policy comprises a redistributive element through the structural funds. These were introduced in 1957 with the European Social Fund, which aimed to improve occupational mobility and job opportunities within European labour markets (Geyer 2000: 134f.). They also attempted to enhance the labour market and economic situation in poorer regions. Indeed, the structural funds may have a redistributive effect between some of the member states.10 A recent study found that, overall, the EU budget is redistributive in the sense that poorer member states contribute less and receive more from the EU budget (Mattila 2006: 48). However, a more detailed analysis demonstrated that only the structural funds work redistributively whilst richer countries profited more from expenditures on internal policies than poorer countries (ibid.). The authors therefore concluded that redistribution in the EU not only depends on the level of Gross Domestic Products (GDP) in a country but also on institutional factors such as the over-representation of smaller member states in the Council (ibid.: 34). Also earlier studies claimed that redistribution in the EU is not strictly related to income levels of individual member states or regions and that it does not aim at a systematic redistribution between richer and poorer individuals. These studies therefore expected that due to ‘creaming effects’ poorer and lower qualified people normally benefit less from the structural funds than better qualified people (Tömmel 1994; Anderson 1995). Additionally, in contrast to national social policy, the structural funds are not based on individual social rights and entitlements. And compared to national social policy expenditure, the structural funds’ financial basis is very limited.11 All in all, EU social policy during the late 1990s remained predominantly market-making and regulatory. By the end of this period, the EU social policy literature generally accepted that EU integration implies an imbalance between ‘negative’ and ‘positive integration’, that is between measures which remove obstacles to create a single market12 and can be enforced by supranational actors, such as the European Court of Justice on the one hand, and provisions that regulate and correct markets and are jointly adopted by the member states on the other (Streeck 1995; Scharpf 1999; Leibfried 2005). At that time, the literature on EU social policy provided several arguments as to why it remained difficult to strengthen a legally binding layer of social policy at the EU level. These arguments are related to the considerable diversity of welfare institutions among the member states, irreconcilable interests of different actors, and the alleged

8

Introduction

lack of a European ‘demos’. These reasons can be contrasted to the view that strengthening the EU’s role in social policy would contribute to a greater problem-solving capacity of social policy and increased legitimacy of national governments and the EU. These two perspectives are detailed in the following section. Obstacles to Europeanizing social policy Diversity and interests The primary reason behind the difficulty of rendering binding EU social policies more comprehensive are irreconcilable interests amongst political actors in the EU. First of all, member state governments object to a stronger role of the EU in social policy because of considerable differences in terms of economic performance, structures and institutions of designing and financing the welfare state, and the political legacies in the various member states. Theories of path dependency suggest that the interests and values of domestic political actors concerning how social policy should be designed and delivered are deeply rooted in national institutions. Therefore domestic political actors refuse to transfer further social policy authorities to the EU level and would not agree to alter their domestic social policy institutions in accordance with EU law. The difference in economic resources among the member states entails further disparities of interest between poorer and richer countries within the EU. Lower social standards are an advantage for poorer countries when they have to compete against richer countries in a single market. Therefore governments, political parties, trade unions and employers from poorer countries are generally more sceptical of common social policy standards at the EU level as they are unable to afford higher standards and would loose their competitive advantage against the richer countries. Vice versa, political actors in richer countries are concerned that common social standards at the EU level might decrease national standards which they could hardly legitimize at home. A further reason of why national governments oppose an increasing transfer of social policy competencies to the EU is related to the ‘legitimacy function’ of social policy. For national governments, social policies are one of the main sources of legitimacy. If they shared more competencies with the EU, this important basis of legitimacy would be weakened. Also, national governments would loose the control over social policy expenses if standards were defined at the EU level. They are, therefore, not interested in such a development. A stronger role of the EU in social policy is also refused by business interests. Business interests are primarily concerned with the cost-efficiency

Introduction

9

of their enterprises and are therefore less supportive than employees or disadvantaged social groups of strengthening the EU’s social dimension. This is because business interests assume that a stronger EU would introduce higher taxes and social security contributions which would then lead to raising production costs. Furthermore, market-liberal business interests believe that the market-correcting policies enacted by public authorities limit the efficiency of markets. In their view, market integration will itself lead to economic growth and, therefore, to increasing living standards in the whole EU. From this perspective, strengthening EU social policy would only impede such a development and would thus be a hindrance to increasing social welfare and creating a more ‘just’ society. Business interests are well organized at the EU level, with authors such as Greenwood (2003) claiming that they are better organized than trade unions, and may at least have a certain degree of influence on EU policymaking. Even if one cannot generalize that all employers or employer organizations oppose the strengthening of market-correcting social standards at the EU level, major players such as the Union des industries de la communauté européenne (UNICE) take a sceptical view on such matters.13 The lacking European ‘demos’ Another type of argument brought forward against an expansion of EU social policy is that the democratic basis for such a development is lacking. The idea is that if EU social policies were extended the EU parliament would need to be given the main policy-making role in this field. This is due to the fact that social policy is a very sensitive policy field, potentially entailing redistribution and consequently touching upon controversial questions of justice, values and interests. It is therefore required that EU citizens have control over social policy decisions through the EU parliament as an indirect legitimization via member state governments would not be sufficient. This suggestion is, however, followed by a second argument denying the possibility of a direct legitimization of EU social policies through the EU parliament. This position refers to the alleged lack of a European political identity and a European demos (Grimm 1997; Scharpf 1999: 9; Weiler 2002: 567) and assumes that even if it were possible to render the EU parliament the most important player in social policymaking, EU citizens would not accept a majority decision by the EU parliament as legitimate. The ‘no demos’ perspective presumes that decisions involving redistribution which are not unanimous but adopted by majority rule can only be accepted by the defeated minority if a common political identity exists. Only if there is a European demos with a common identity and ‘fellow-feeling’14 amongst the citizens, will the defeated

10

Introduction

minority trust that the majority aimed to contribute to the common welfare of all citizens instead of favouring its own self-interest (Scharpf 1999: 7f.). This position pessimistically concludes that it is currently impossible to strengthen ‘social Europe’ because the social and political preconditions for this are lacking. The need for coordination Despite these obstacles to developing market-correcting EU social policies, many authors as well as policy-makers supported a strengthening of ‘social Europe’ during the 1990s. Their arguments were related to avoiding a ‘race-to-the-bottom’ of social standards, maintaining the legitimacy of the project of European integration, and contributing to a European political identity and democracy. Preventing a race-to-the bottom and tackling common challenges The first of these arguments that a strong ‘social Europe’ can avoid a ‘race-to-the-bottom’ of national social standards has perhaps been the most prominent in the discussion on EU social policy. From this perspective, the national economic and social systems compete more directly against each other in a single market and governments therefore feel an increasing pressure to trim down social standards in order to remain competitive. Some areas of social policy systems are also affected by EU common market and competition law. For example, the European Court of Justice can demand that member states abolish certain state subsidies and open up public services to the private market in order to remove distortions of competition. Pressure on social standards also increased after the establishment of the monetary union. Since the creation of the European Central Bank, member states can no longer use macro-economic instruments such as monetary and exchange rate policy to influence the demand side of the economy, or compensate for differences in productivity levels or labour costs per unit produced. Moreover, member states’ fiscal policies are constrained by the rules of the Stability and Growth Pact which sets certain limits to overall and annual additional state deficits. Due to this, governments may choose to diminish the public sector or cut social and labour market policy programmes in order to restrict state deficits. Deficit-spending no longer belongs to an approved repertoire of policy measures, and member state governments focus instead on supplyside policies. Furthermore, wages and non-wage labour costs are now transparent in monetary terms via the common currency and therefore become an important issue of competitiveness among member states which belong to the Eurozone. Authors such as Visser have correspondingly found that

Introduction

11

the lack of wage co-ordination within the EMU framework exerts ‘strong disciplinary effects on wage bargaining’ (Visser 2000: 447). Overall, the logic behind these arguments maintains that a single market, monetary union, and EU regulations controlling member state fiscal policies will exert a downwards pressure on national standards and wages and that this could be prevented if member states adopted common social standards at the EU level. In addition to the argument that a stronger EU in social policy could prevent a race-to-the bottom one can also claim that the member states are currently facing similar difficulties that pose problems for national social policies and that an approach coordinated by the EU will be more effective in tackling these issues. Examples for current challenges are demographic change, an internationalisation of the economy and ‘jobless’ economic growth. Member states will have different capacities in dealing with these problems. If the EU coordinates responses and supports those member states with limited capacities the overall response to these problems is likely to be more effective and beneficial to all member states. Providing political legitimacy A further argument for strengthening ‘social Europe’ states that an EU that privileges negative integration over positive integration undermines the political legitimacy of national governments and the EU. This view maintains that ‘negative integration’, which is the creation of a single market through removing obstacles to market integration, restricts the powers of member states in designing their domestic social policies (Streeck 1995; Scharpf 1999; Leibfried 2005). Member state governments’ choices become restricted because they have to maintain their economic competitiveness and are not allowed to exceed certain state deficit limits. To remain competitive they may have to cut social standards and social policy expenditures. As social policy is an important source of legitimacy for welfare states, these restrictions can limit the political legitimacy of national governments or cause anti-European movements if citizens blame the EU for the retrenchment of the welfare state. Consequently, authors such as Habermas (2001) and Offe (2003a: 457) argued that a strong ‘social Europe’ could help to maintain high social standards and therefore political legitimacy at both the national and European levels. Habermas (2001) in particular claimed that a strong ‘social Europe’ could help to develop a common political identity of European citizens. According to this approach, EU citizens become more interested in policy developments at the EU level if they are directly affected by them. Consequently, they will also have more incentives to participate in EU

12

Introduction

elections, form European parties and engage in European-wide political discussions. This would then, allegedly, contribute to the development of a European public, a European identity and demos, and therefore strengthen democracy in the European Union. What remained unclear or unresolved in the discussion concerning strengthening ‘social Europe’ was exactly how this should be achieved. Until the early 1990s, many authors and leftist political parties believed that the establishment of a European welfare state and the harmonization of social standards at the EU level would be the best way to avoid a ‘race-to-the-bottom’. This view was, however, increasingly questioned during the 1990s, and the EU Commission itself stated that due to the diversity of national systems, harmonization cannot be the aim of social policy (Commission of the European Communities 1992). Conversely, it introduced the ‘convergence of social protection objectives and policies’ to the political agenda (ibid.). This can be regarded as a starting point for developing the Open Method of Coordination. After the member states had decided to complete the single market in 1991 and set out plans for establishing a monetary union, member state governments and the EU became concerned that EU citizens could hold the EU responsible for national welfare state retrenchment. In order to avoid a European backlash, social policy came to feature increasingly prominently upon the EU agenda. Whilst it seemed clear that it was not possible to establish a European welfare state and harmonize social policies, convergence through soft coordination became regarded as a ‘middle-way solution’ to this situation. The EU Commission and member states perceived soft coordination as a compromise as they believed it could provide a means of strengthening ‘social Europe’ whilst not restricting member state authorities in the area of social policy and confine the diversity of social policy institutions. Shortly before the Luxembourg Council in 1997, social democratic governments came into place in Great Britain and in France, two influential players at the EU level. This shift in the political landscape enabled the introduction of the new employment (Art. 125–30) and social policy titles (Art. 136, 137) into the Treaty of Amsterdam. The new employment title established the European Employment Strategy. By 2000, 13 of the 15 member state governments were (co-)governed by social democratic parties. This provided a further ‘window of opportunity’ to widen the application of the Open Method of Coordination. The European Council of Lisbon in 2000 adopted the ‘Lisbon Agenda’, aiming for the EU to become the ‘most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and

Introduction

13

greater social cohesion’ (European Council 2000b: para 5). The European Council concluded that the Lisbon agenda should be realized through the application of the OMC. Overall, I interpret the OMC to be a response to the dilemma that member state governments on the one hand feared a loss of acceptance for European integration with its dominant single market agenda by their citizens but, on the other, did not want to give up their sovereignty and autonomy in social policy. For these reasons, they could not adopt a binding and common framework of market-correcting social standards at the EU level. The member states therefore developed the OMC as an alternative method through which they wanted to overcome this deadlock: by strengthening the EU’s role in social policy and gaining more credibility for the project of European integration, whilst formally retaining their authority in national social policy-making. In addition, member state governments felt the need to reform social security systems by the end of the 1990s due to common challenges such as an ageing population, high unemployment, financial sustainability and the creation of a single market. On this backdrop the OMC established an EU-wide reform agenda promising to be an additional ‘reform lever’ for national governments. Overall, the OMC can be regarded as a compromise that seeks to overcome considerable tensions in European social policy. This book is devoted to investigating how the OMC works and whether it is successful in overcoming these difficulties.

Organization of the book This book’s analysis of the OMC is divided into three parts. Part I conceptualizes how the OMC works and investigates its goals, part II examines the way in which the OMC in employment policy has been ‘implemented’ in both Germany and the United Kingdom and part III evaluates the OMC’s effectiveness and legitimacy. The analysis of the OMC in Part I comprises Chapters 2 and 3. Chapter 2 conceptualizes the OMC’s mode of operation. Claiming that the OMC cannot be interpreted as exerting a top-down influence upon member states, the OMC is instead a variant of a ‘two-level game’ (Putnam 1988) in which member states play a strong role in setting the policy agenda. This chapter therefore details member states’ interests and strategies in dealing with the OMC. For example, according to the OMC-specific twolevel game, national policy actors not only ‘implement’ OMC objectives that have been formulated at the EU level, but seek to influence the OMC agenda in order to minimise adjustment costs. In addition, they are keen to

14

Introduction

interpret broadly formulated OMC objectives in a way that best suits the national context. The chapter also develops a framework of explaining possible differences in member state responses to the OMC by considering the role of national institutional contexts and actor constellations in member states. Overall, the chapter maintains that top-down and bottom-up mechanisms are combined in a specific configuration within the OMC. This extraordinary design of the OMC creates specific dynamics and problems. Chapter 3 analyses the OMC’s policy content, demonstrating that the OMC is linked to the EU’s concept of a ‘European Social Model’. This model, and consequently the OMC, is based on a ‘third way’ approach popular among ‘new’ social democratic parties and governments during the 1990s. This chapter also discusses the internal tensions of the OMC’s social policy goals. Part II, consisting of Chapters 4 and 5, presents findings regarding the way policy actors in Germany and the UK responded to the OMC. These two countries were selected as case studies because they exhibit considerable differences in their labour market and welfare regimes as well as their political systems. In the ‘varieties of capitalism’ literature, the UK was been characterised as a liberal market economy that stands in contrast to Germany’s coordinated market economy (Wood 2001). The basic assumption behind the decision of comparing two contrasting member states was that the differences in responses would become most obvious and similarities would be more challenging to explain. If the responses in the two countries are very different, this indicates that the OMC is a very soft governance method that can be adjusted to national circumstances. If responses are relatively similar, the OMC can be held to exert a topdown pressure for national policy reform. If both differences and similarities can be observed, one can assume that the OMC incorporates not only top-down, but also bottom-up features. By selecting these two very different countries, it was hoped that a particularly clear pattern of the OMC’s characteristics would emerge. Chapter 4 examines the different contextual dimensions in Germany and the United Kingdom that may play a role in shaping policy actors’ responses to the OMC. These dimensions include the ‘goodness of fit’ between OMC objectives and national policies/performance, the national political system and role of the social partners in policy-making, the organization of producing the National Action Plans and the relationship between these countries and the EU. Based on expert interviews, parliamentary papers and other official documents, Chapter 5 analyses the way in which policy makers in Germany and the United Kingdom responded to the OMC within employment

Introduction

15

policy, that is the European Employment Strategy (EES). It also discusses whether, and if so in which areas, policy actors in these two countries ‘used’ the EES in labour market policy-making. It thereby reveals considerable differences, as well as striking similarities, in the way in which policy-makers in Germany and the United Kingdom dealt with the EES. Finally, the chapter explains these differences and similarities by referring to the national contexts analysed in the previous chapter. Part III evaluates the OMC’s effectiveness and legitimacy. Whilst the OMC attempts to govern actors and processes, it is not legally binding, cannot be enforced and is not adopted by parliaments. It is thus important to question whether this method can be effective if it is not legally binding. Furthermore, one may also question the legitimacy of this policy coordination if it ‘influences’ domestic policies whilst its goals are not adopted in classical democratic processes. These general questions are particularly relevant in the area of social policy. Social policy can entail redistribution, and is related to deeply rooted values and ideological traditions regarding the relationship between the state, society and the individual. A successful legitimization of social policy is therefore as difficult as it is essential. Moreover, several authors have argued that market-making policies at the EU level restrict member states’ autonomy in social policy-making (Scharpf 1999: 71; Habermas 2001; Leibfried 2005). They fear that EU integration could potentially undermine one of national governments’ primary sources of legitimacy. It is thus vital to establish whether the OMC could create a framework that re-establishes national governments’ choices in social policy-making by bringing market-making and market-correcting policy objectives into closer balance at the EU level. Effectiveness and legitimacy are therefore particularly relevant when evaluating the OMC. This evaluation of the OMC’s effectiveness and legitimacy is dealt with in Chapters 6 and 7. Chapter 6 provides an initial overview of the evaluation framework before investigating the OMC’s effectiveness by analysing whether its quantitative targets have been achieved. It subsequently discusses whether, and if so, in which areas, convergence has occurred across EU member states. It finally elaborates on the question of whether the OMC could contribute to balancing the economic and social policy goals of the European Union. Chapter 7 examines the democratic quality and legitimacy of the OMC by analysing the democratic rational behind some of the OMC processes, as well as the character of its intervention into member states’ social policies. The conclusion draws together the central arguments of this work and discusses several reform options for the OMC.

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Part I The Open Method of Coordination

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2 Conceptualizing the OMC

This chapter conceptualizes the OMC’s mode of operation. It claims that the OMC cannot be understood as exerting a top-down influence on member states. Rather, the OMC is a variant of a ‘two-level game’ in which member states play a strong role in setting the policy agenda. This chapter therefore details member states’ interests and strategies in dealing with the OMC and develops a framework to explain possible differences in member state responses to the OMC. The OMC is a governance method which is ‘softer’ than the ‘classical’, ‘regulatory’ or ‘redistributive’ mode of EU governance (Wallace 2005). Its objectives are not legally binding and there are no formal sanctions available if member states fail to adopt or achieve OMC objectives. The OMC has been established as a middle way: on the one hand the EU becomes involved in formulating social policy objectives, whilst on the other, member states’ authority in social policy is still guaranteed, according to the principle of subsidiarity. Despite the fact that the OMC is not legally binding, the European Commission and Council, as well as many OMC scholars, assume that the OMC will be effective in achieving its objectives and that it will influence social policy-making at the national level. Therefore the paradoxical question of how a ‘soft’ and non-binding governance method could be effective arises. Why should member state governments ‘implement’ OMC objectives when they are not legally obliged to do so and are not threatened by sanctions other than ‘naming and shaming’ by the EU Commission, peer member states or experts? Are these ‘soft sanctions’ incentive enough for introducing policy changes in-line with the OMC? Such questions regarding the OMC’s ‘influence’ have been discussed in the OMC literature, within which there are predominantly two opposing views. Sceptical scholars compare the OMC to ‘hard law’ EU policies and 19

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The Open Method of Coordination

argue that the OMC cannot influence national policy-making due to its non-bindingness and lack of sanctions (Héritier 2002; Chalmers and Lodge 2003: 13, 18f.). Optimistic OMC scholars, however, dispute this claim, arguing that ‘hard law’ is often not that ‘hard’ because it can contain very broad and abstract terms so that actors retain significant discretion when implementing it (Trubek and Trubek 2005). Furthermore, they assume that ‘soft law’ can be effective and in fact presents a more potential policy instrument than hard law, particularly if member states fundamentally disagree about policy approaches or want to retain authority in a particular policy area. This is the case with EU social policy. In my view, the question of the OMC’s influence cannot be answered with either a clear ‘yes’ or ‘no’. Rather, the answer lies somewhere in-between. Whilst the OMC makes a difference within national social policy development, it does not do so in the way promoted by the EU or hoped for by optimistic OMC scholars. Moreover, it is not enough to examine the ‘influence’ of the OMC on national policy-making alone. In this chapter it will be argued that the OMC is a variant of a ‘two-level game’ (Putnam 1988) in which member state governments and non-governmental actors can influence the OMC agenda at the EU level and, subsequently, strategically and selectively ‘use’ the OMC in national policy-making processes (cf. also Jacquot and Woll 2003). In other words, the OMC is neither a pure top-down nor bottomup process, but a combination of both. This is a new situation that poses novel problems in terms of transparency, accountability and legitimacy.

‘Influence’ in OMC research This section argues that interpreting the OMC as a governance instrument that exerts a top-down influence on member states is inappropriate and creates considerable methodological problems. The EU presented the OMC as a means of strengthening ‘social Europe’ and the ‘European Social Model’ (European Council 2000b: 5; European Council 2000a: 15). Some authors even assumed that the OMC could balance out the ‘current structural asymmetry between negative and positive integration’ (Ferrera and Rhodes 2000: 278). To achieve this, the OMC must be effective in the sense that it leads to the establishment of social policy objectives which are accepted in all member states and which then have an impact on social policy-making at the national level. Therefore questions regarding the OMC’s effectiveness and influence dominate OMC evaluations and research. However, I claim that there are several flaws in the way in which this research has been undertaken.

Conceptualizing the OMC

21

Available evaluations and most academic studies concerning the OMC examine whether national policies moved closer towards OMC objectives (e.g. De la Porte and Pochet 2002a; Zeitlin et al. 2005). These analyses often maintain that there are common trends towards OMC objectives in EU member states, at least with regards to the framing of problems and justification of policies (e.g. Zeitlin 2005b: 470; López-Santana 2006). Such studies often conclude that the OMC is effective and influences national policy-making. Studies predominantly examining the development of national policies are, however, problematic from a methodological point of view. Firstly, since the OMC objectives are very broadly formulated it is unclear which national policy developments should be considered to reflect an OMC ‘influence’. Secondly, even if national policies appeared to move towards the OMC it is not obvious exactly what role the OMC played in this process. It is, for example, possible, that policy change has been triggered solely by internal factors. Many studies not only analyse policy developments but additionally employ interviews with national policy-makers to explore whether the OMC had an ‘influence’ on national policies. A comparison of results, however, remains inconclusive. Many policy makers claim that the OMC has not introduced wholly new policies, but merely contributed to the development of existing ones. This is, for example, reported in studies conducted by Jacobsson (2005), Büchs & Friedrich (2005) and Visser (2005). Some governments even state that their national approaches have shaped the OMC agenda. This has, for instance, occurred in the UK regarding the ‘activation’ and ‘making work pay’ agenda (House of Commons 1999a: Column 472) and in France regarding the ‘social inclusion/exclusion’ approach (Erhel et al. 2005: 232f.). These statements already indicate that the OMC has to be perceived as a ‘two-level game’ in which member state governments pursue their own interests and try to influence the OMC agenda and/or use the OMC in a way that they find politically favourable. Therefore the concept of ‘influence’ is also too simplistic, since it neglects this ‘bottom-up’ aspect of the OMC and suggests that analysing the implementation of the OMC objectives at the member state level is sufficient. Due to these problems inherent in the concept of ‘influence’ in OMC research, I suggest focussing instead on the way in which policy-actors at the member state level, particularly governments, try to shape the OMC agenda and how they subsequently ‘use’ the OMC in national policymaking processes. I will discuss this in more detail below. It is first worth briefly examining the theories and explanations within the OMC literature to assess the potential effectiveness and influence of the OMC.

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The Open Method of Coordination

Theorizing the OMC’s influence and effectiveness Interpretations as to why the OMC could be effective and exert influence on national policy-making have been proposed by authors such as Trubek & Trubek (2005), Jacobsson (2004b) and (2004a) and Hemerijck & Visser (2001). The list of concepts employed in the literature is varied, comprising policy learning, policy transfer, deliberation, participation, peer pressure, shaming, diffusion and mimicking. Trubek & Trubek (2005) ordered these different approaches on the axis of top-down versus bottomup, arguing that these different mechanisms are not necessarily exclusive. Here, I present the concepts of ‘diffusion’, ‘naming and shaming’, discourse, ‘policy learning’ and ‘mimicking’. I will then argue that the topdown and bottom-up perspectives need to be more radically combined to explain how the OMC works. Diffusion The ‘diffusion’ approach emphasizes the top-down character of the OMC. It analyses processes by which ideas or institutions spread across countries. According to the diffusion perspective, these processes have a quasi-automatic and functional character. Policy actors do not deliberately decide or ‘choose’ to adjust their ideas, policies and institutions to those promoted by the EU but this adjustment is functionally required to maintain competitiveness (Katz and Lazarsfeld 1964; Walker 1969; Gray 1973; Berry and Berry 1990). From the diffusion perspective, the OMC provides a framework for a self-steering evolutionary European social model in which ‘best practices’ are diffused and adopted according to the standards of economic and social development. The diffusion approach is problematic because it perceives the OMC as a functional process. It neglects the importance of politics as well as the interests and interpretations of actors in the process of dealing with the OMC. Peer pressure and shaming Peer pressure and shaming also focus on the ‘coercive’ and top-down elements of the OMC. These approaches assume that national governments are rational actors who try to avoid being ‘shamed’ or ‘blamed’ by the EU, other member states or domestic opposition parties for not fulfilling OMC objectives. Theoretically, this could occur because the OMC provides opportunities for shaming and blaming through its benchmarking and evaluation procedures, including quantitative targets and precise timetables that make outcomes measurable and easily comparable (Jacobsson 2004a; Trubek and Trubek 2005). Since these evaluation

Conceptualizing the OMC

23

processes are reiterated and member states cannot escape from the ‘game’ played in the EU they have the incentive of avoiding a negative reputation. Such a reputation could have damaging effects in terms of election turnout for the government party/parties and could also diminish the trust of economic investors. There are, however, two preconditions if peer pressure and shaming are to work. First, all or most other member states must take the OMC procedures seriously; otherwise, those complying with the OMC could experience a competitive disadvantage. Secondly, the citizens must be aware of the OMC and concerned about the evaluation results issued by the EU. This can only occur if national policy-makers place the OMC highly on the agenda, discuss it widely and integrate a great number of actors in OMC processes. The media must also extensively report about the OMC. Since empirical analyses demonstrate the OMC’s low public and media presence (Umbach 2004; Meyer 2005), it is doubtful that the ‘shaming’ of national governments by EU institutions increases the OMC’s ‘influence’ and effectiveness. Discourse In general, discursive approaches emphasize the importance of ideas, language and communication in the construction of the social world, identity building and behaviour. Jacobsson (2004a, b) combined a discursive perspective with theories of social interaction and networks to explain the effectiveness of the OMC. Although rejecting a purely structuralist approach, the work still tends to construct the OMC as top-down process. According to this perspective the OMC creates EU-wide discourses, promoting particular values and ideas about social policies. Since governments and nongovernmental actors at the EU and national levels are integrated into these OMC networks which meet regularly, the participants are ‘socialized’ by this discourse. This, in turn, affects national policy-making as governments and non-governmental actors behave according to a ‘logic of appropriateness’ (March and Olson 2004), adhering to the promoted policy approaches because they think it is the ‘right thing to do’. This discursive approach is useful for understanding some of the aspects surrounding the way in which the OMC might work. However, it does not place sufficient emphasis on politics and the strategies of political actors. In addition, it cannot account for different responses to the OMC in the various member states. Policy learning and deliberation ‘Policy learning’ and ‘deliberation’ both conceptualize the OMC as a bottom-up process and stress the role of actors. ‘Policy learning’ assumes

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The Open Method of Coordination

that policy makers’ perceptions, assumptions and attitudes change voluntarily because they ‘rationally’ evaluate information and evidence (Hall 1993; Dolowitz and Marsh 1996; Kröger 2006). In the literature, this process is sometimes referred to as ‘policy transfer’ (Bennett 1991; Wolman 1992; Dolowitz and Marsh 2000; Wolman and Page 2002) or ‘lesson drawing’ (Robertson 1991; Rose 1991; Linos 2006). The literature identifies different conditions for policy learning. Learning is more likely to occur if domestic actors are dissatisfied with policy outcomes (Rose 1991: 10f.); if accepted data and theories exist regarding a specific policy problem (Jenkins-Smith and Sabatier 1993: 52); and if a prestigious forum is in place to provide an incentive for policy-makers to take part in this learning process (ibid: 54) and to regularly meet other participants. Sabatier (1993: 34ff.) assumes that the core aspects of ‘belief systems’ are less likely to change through policy learning than secondary aspects. Deliberation is an activity that can bring about policy learning. It is a communication situation characterized by a symmetry of power relationships, usage of ‘rational’ arguments, and participants who do not act in a self-interested manner but are oriented towards the ‘common good’, truth and honesty (Habermas 1987). This kind of communication is more likely to arise if the participants know each other personally and meet regularly. In one-off situations there is little incentive for participants to behave in a sincere and non-selfish manner because there are no social sanctions that could be applied in the case of non-compliance. However, if meetings take place more than once and if the participants know each other social conventions develop and social sanctions, such as the loss of reputation or exclusion from important information, can be applied to norm-violators (Jacobsson 2004a). Therefore, theorists of network governance promote the idea that democratic self-regulation can take place in deliberative networks (Börzel 1997; Eising and Kohler-Koch 1999; Kohler-Koch 2002; Héritier 2003). These concepts of policy learning and deliberation within networks can be applied to the OMC. The OMC provides an opportunity for regular meetings and information exchange between member state governments and the European Commission. Information exchange is supported by the regular issuing of reports and evaluations. Member state governments may even receive recommendations for policy alterations by the European Commission. Moreover, the OMC objectives and targets provide a general framework for interpreting the causes of social problems and developing approaches to tackle them. According to the policy learning and deliberation perspective, the OMC provides incentives and valuable information that can lead to voluntary policy learning by the member states.

Conceptualizing the OMC

25

However, the policy learning and deliberation approaches also bear problems. From an institutionalist perspective (North 1990; Hollingsworth and Boyer 1998; Hall and Soskice 2001) one can argue that national institutions potentially hinder voluntary and ‘rational’ policy learning. This is because policies are deeply embedded in institutional settings and changes considerably diverting from this institutional path are too costly to be adopted – unless there are extraordinary circumstances and ‘windows of opportunity’. Since the OMC is not supposed to create such extraordinary circumstances, institutionalists will argue that it is not powerful enough to trigger policy learning if the national and OMC approaches differ too greatly. The emphasis of the OMC’s voluntary character in the policy learning and deliberation approach therefore actually points to the limitations of the OMC’s effectiveness and ‘influence’. Mimicking The mimicking approach comes closest to combining the bottom-up and the top-down perspectives. It is essentially a sociological model of economic behaviour that refuses a pure ‘rational actor’ theory of economics and perceives actors as both interdependent and embedded in social networks. Furthermore, it acknowledges that market information is often insufficient or lacking so that actors do not obtain all the information needed to make rational decisions. Instead, actors rely on the opinions and decisions made by others. They may trust the advice of reputable councillors, colleagues and friends, for example, or assume that if a considerable number of actors have taken a certain decision before them, it must be the ‘right’ one. Therefore, they join the others in taking this decision. This type of decision-making has been studied by behaviouralists and social economists (Banerjee 1992; Bikhchandani, Hirshleifer et al. 1998) but it has also been recently applied in the field of social policy development (Bridgen and Meyer 2005). From this perspective, the OMC can provide a framework for spreading ‘good practices’ and political advice. Policy-makers become willing to join new policy approaches according to advice from other actors because they cannot reliably judge the potential outcomes of the different policy choices available. In contrast to the ‘policy-learning’ approach, ‘mimicking’ assumes that policy-makers do not accept advice from experts and other policy actors due to a rational evaluation of information and voluntary learning but because of structural hindrances, such as the complexity of social problems and difficulties in extrapolating the long-term effects of policies. According to this approach, policy actors can either actively ask for external advice (bottom-up), or they can be persuaded to join a

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The Open Method of Coordination

spreading belief in new policy concepts because all other actors around them have done so (top-down).

‘Invited dutifulness’ A review of these contrasting approaches demonstrated that all provide useful insights into the puzzle of why a legally non-binding EU governance instrument could possibly exert influence on member state policies and effectively achieve its goals. According to these perspectives, the fact that the OMC is non-binding is an advantage because it would otherwise be impossible to agree upon common objectives at the EU level. The OMC’s functioning is then explained either by its discursive elements (bottom-up voluntary learning) or by its socializing effects through repeated interaction, peer review and shaming (top-down). In my view, the top-down and bottom-up perspectives need to be combined in order to comprehend the complexity of the OMC’s operation. Firstly it is worth remembering that the OMC is a ‘middle way’ governance approach. On the one hand, the EU gets involved in European social policy-making but it did not acquire a formal authority for policymaking in the areas covered by the OMC, nor can it steer the process of how OMC objectives are defined or how member states respond. On the other hand, member states remain formally autonomous in OMC social policy areas, but in fact they become involved in a complex ‘two-level game’ with the EU. I propose to describe this situation by the notion of ‘invited dutifulness’.1 I suggest understanding ‘invited dutifulness’ as a situation in which the member states agree to the OMC because they have an interest in ‘using’ the OMC at home as an additional reform lever. Member state governments can either try to ‘upload’ (Börzel 2002) their policy approaches to the EU so that it suits their domestic interests most or influence the OMC objectives or recommendations in order to create additional ‘external’ support for domestic policy reforms. The deal is that member state governments can then ‘blame’ the EU for necessitating policy change despite the fact that the member states themselves are the main actors in defining the OMC objectives. The strategies of the member states represent the bottom-up element within the OMC. The EU, on the other hand, can claim to be engaged in EU social policies and to make efforts to ‘strengthen’ social Europe. Apart from rhetoric the OMC can also entail a top-down dynamic. This is because not every member state will be equally successful in defining the OMC agenda. Rather it is possible that the negotiations between member states and EU institutions bring about new formulations and approaches that differ

Conceptualizing the OMC

27

from the sum of member state positions to particular social policies. This potential self-dynamic of the process as well as the informal pressure exerted by the EU exhibit the top-down elements of the OMC. The following two sections analyse the OMC policy-making processes and aim to uncover some evidence for the idea that the OMC operates according to the concept of ‘invited dutifulness’.

Defining the OMC agenda This section maintains that the EU institutions and member state governments play a different role in OMC policy-making compared to the ‘Classical Community Method’. Whilst the ‘Classical Community Method’ is also a type of multi-level governance that combines top-down and bottom-up elements, its supra-national elements are stronger than in the OMC and the member states play a more important role in OMC policy-making. The term ‘Classical Community Method’ was coined by Scott and Trubek (2002). Drawing mainly on the EU Commission’s White Paper on governance (Commission of the European Communities 2001d) they mention the following features of the ‘Classical Community Method’. Policy-making based on this classical method produces legally binding provisions which either directly apply at the member state level or which have to be transposed into national law allowing for a certain degree of flexibility. The EU institutions play particular roles in the policy-making process. The European Commission has the right of legislative initiative. Both the Council of the European Union and the European Parliament have legislative rights and are mutually involved in the adoption of secondary EU law. Whilst overall the Council is the more powerful actor in European Union law-making, the rights of the European Parliament have been extended through treaty amendments since the late 1980s. The Treaties of Amsterdam and Nice strengthened the co-decision procedure in which the EU Council cannot take a decision unless the EU Parliament approves it (Hix 2005: 78f.). The European Court of Justice guards the application of EU law. The EU Commission and other member states can appeal to the European Court of Justice for it to decide whether or not a member state has violated EU law. The EU Commission, the Council and the member states can also request that the European Court of Justice proves whether a decision of various EU institutions is coherent with the EU treaties. Although the European Court of Justice’s power to enforce EU law is limited, it plays a very important role in interpreting, creating and guaranteeing EU law (cf. Hix 2005: 119ff.). It has also played an important role in developing EU social law (Falkner et al. 2005; Leibfried 2005: 248ff.).

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The Open Method of Coordination

Overall, the ‘Classical Community Method’ seeks to strike a balance between the diversity of the member states and the effectiveness of European policy-making. The European Commission has the role of pursuing and promoting the ‘general’, European interest whilst the Council of the European Union and the European Parliament represent the interests of the individual member states and guarantee democratic representation of these interests (Commission of the European Communities 2001d: 8; Scott and Trubek 2002; Hix 2005). But whilst the ‘Classical Community Method also combines top-down and bottom-up elements, its supra-national or top-down elements are stronger than in the OMC. This difference between the ‘Classical Community Method’ and the OMC can be demonstrated by analysing the role of EU institutions and member state actors in OMC policy-making. The Lisbon Council provided a general description of the OMC instruments (European Council 2000b: para 37). They included the adoption of non-binding guidelines and timetables defining when the objectives should be achieved; ‘where appropriate, the definition of quantitative targets and indicators to measure goal achievement’; and the periodical ‘monitoring, evaluation, and peer review’ of national policy reforms and responses to the OMC (ibid.). Indeed, these features play a role in all social policy OMCs, however they are organized slightly differently in the European Employment Strategy, the OMC in social inclusion, the OMC in pension, and the OMC in health and long-term care. The latter three have recently been integrated to the OMC in social inclusion and social protection. Therefore the same instruments and reporting cycles now apply to them. The OMC is designed more rigorously when applied in European employment policy. The European Employment Strategy is based on Articles 125–30 of the Treaty of the European Communities while the other social policy OMCs do not have an explicit treaty basis. In the European Employment Strategy, guidelines and recommendations adopted by the Council of the EU are used. In the other OMCs, only a set of broad objectives is adopted by the European Council. In the European Employment Strategy, quantitative targets setting goals to be reached by a certain point in time are partially incorporated in the employment guidelines (Council of the European Union 2005a), while in the other OMCs quantitative indicators are only being developed to measure performance and policy development (European Commission 2006c; European Commission 2006d). The targets and indicators are adopted by the Employment Committee and the Social Protection Committee.2 Both Committees consist of two representatives of each member state government and two members of the EU Commission. They can invite interest groups and NGO

Conceptualizing the OMC

29

representatives as well as academic experts; however no clear rules exist regarding the role of these actors in the decision-making processes. The decisions of the Committees are not legally binding. The member state governments have to produce National Reform Programmes and National Strategy Reports in the OMC employment, social inclusion and protection. These plans have previously been named ‘National Action Plans’ by the EU, a term that I will mostly use throughout this book for reasons of simplicity. These plans are intended to account for the ‘implementation’ of the OMC and should specify which measures will be taken in future to move closer to the OMC. The governments are asked to involve social partners, NGOs and representatives of the regions in producing these plans. National parliaments normally do not participate in adopting these plans and are only informed about them. The cycles of National Action Plan production were different in the various OMCs until 2005. Since the reform of the Lisbon Strategy in 2005 however, these programmes or reports have to be produced every three years. In all OMCs, the Commission and the Council publish a triennial joint report evaluating the developments in these areas in all member states. This reporting system aims to make information about the social policy systems and ongoing policy changes more accessible and comparable to the European institutions and other member states. It also aims to identify best practices, but also poor performance and required reforms. The reports are therefore hoped to function as a resource for cross-national ‘policy learning’. These instruments of ‘policy learning’ are underpinned by arrangements for more specific peer reviews in the OMC in which a host country presents a specific policy initiative to a selected range of peer countries who can comment and evaluate this policy measure and possibly also ‘learn’ from it (Casey 2005b). The EU institutions play a different role in OMC processes in comparison with the ‘Classical Community Method’. The European Council, although it is not formally an EU institution, has a crucial agenda setting role in the OMC. The Commission, comparable to the ‘Classical Community Method’, has the right to issue proposals on OMC reforms. In addition, it plays an important role in evaluating member state policies in light of the OMC objectives. Overall, it is however less powerful than in the Classical Community Method, which will be explained below. The ‘intergovernmental’ Council of the European Union, which represents the member state governments and is the EU’s legislative organ, plays a major role in the OMC. It adopts the legally non-binding policy guidelines and recommendations in the European Employment Strategy. In the OMC in social inclusion and social protection, objectives are merely

30

The Open Method of Coordination

proposed by the European Council and EU Commission, demonstrating that these OMC strands are even more informal and flexible than the European Employment Strategy. In contrast to the ‘Classical Community Method’ the European Parliament does not play a formal role in OMC processes. In the EES, it is a requirement that the European Parliament is consulted about the guidelines (Art. 128, 2 TEC), but it does not possess any rights of co-decision. In the other social policy OMCs, the role of the European Parliament is not formally defined and has thus far only issued opinions regarding the OMC, partially demanding to become more closely involved with the OMC (e.g. European Parliament 2002). The member state governments themselves play an important role in defining the OMC agenda. Several empirical studies on the OMC report that member state governments were successful in ‘uploading’ their policy approaches, for example the British, Swedish, Danish and Dutch governments (Ferrera and Sacchi 2005: 142; Jacobsson 2005: 107; Visser 2005: 199). This is not fundamentally different from policy-making in the ‘Classical Community Method’, in which member states try to ‘upload’ their policy approaches in order to minimize implementation costs (Börzel 2002) or where they can veto decisions in the Council of the European Union. In the OMC, however, the situation paradoxically differs in two ways. First, the OMC is not an individual policy initiative but a reiterative process. Therefore the EU Commission has a vital interest in a consensual approach and cannot afford to impose OMC objectives on the member states to which they do not agree. Due to this, member state governments are asked to widely consult with national social partners and members of the ‘civil society’ on the OMC objectives to attain their consent. Member state governments also have a relatively strong position in bi- or multi-lateral negotiations with the EU Commission on the OMC objectives, indicators and EU reports. Jobelius (2003) analysed how the employment guidelines in 2003 were formulated and concluded that the Commission was not successful in introducing more rigorous quantitative indicators due to opposition by member state governments. This can also be illustrated by the fact that the EU Commission included job counselling into its definition of ‘measures of active labour market policy’. This was demanded by the UK government, who strongly opposed the Commission’s view that the UK did not comply with the objective of providing a measure of active labour market policy for young people after six months of unemployment at the latest (House of Commons 1999b: para 5.14; House of Commons 2003a: para 9.8). The UK government

Conceptualizing the OMC

31

argued that it actually fulfilled this objective if the EU Commission accepted job counselling as a measure of active labour market policy. Due to this intervention, the UK is now the only EU country reported to be fully complying with these activation objectives (European Commission 2006c: 56ff.). Secondly, member state governments know that the OMC objectives are not legally binding, that their national parliaments do not have to agree to them or transpose them into national law and that the EU cannot impose any formal sanctions if the objectives are not achieved. It is therefore no political risk for governments to agree to ambitious objectives or policy approaches that are quite distinct from those existing ‘at home’. Moreover, they may even hope to use the OMC as an additional justification for planned policy reforms. Overall, the OMC must therefore be perceived as a ‘two-level game’ involving a range of actors from the EU and member state levels who pursue their interests. The OMC differs in a paradoxical way from the ‘Classical Community Method’: on the one hand, member state governments are more powerful in influencing the OMC agenda; on the other hand, since there are no sanction for non-compliance, they might be willing to agree to more far-reaching objectives at the EU level as they would be under the ‘Classical Community Method’. They may reckon to be able to ‘use’ the OMC objective as additional reform lever in domestic policy processes. The following section lists a number of options that can be pursued by national governments and non-governmental actors in presenting the OMC’s role in policy-making to the public.

Typology of responses It is useful to distinguish different ‘strategies’ of how policy actors respond to the OMC. This typology can later be used to empirically examine domestic ‘usages’ of the OMC. The possible responses identified below can all occur in one country. Member states will, however, vary regarding the relative importance of the different responses. In other words, while all member states may try to ‘upload’ their interests to the OMC agenda, some will do so very openly or successfully while others will do it ‘behind closed doors’ or be less successful. One must also consider that domestic actors, particularly governments, tell a deliberate story about their response to the OMC and its role for national policy-making, for example in the National Action Plans, other official documents or parliamentary debates. This portrait may or may

32

The Open Method of Coordination

not reflect the role that the OMC ‘actually’ played in domestic policymaking. Therefore, the typology of policy actors’ responses to the OMC that I propose in the following is not a typology about the ‘actual’ role of the OMC in domestic policy-making but about how policy actors conceive of and present the OMC’s role at the national level.3 Strong blaming Domestic policy actors, governments in particular, can present the OMC as a motivator for national policy change by identifying the OMC as one of the main – or the main – reason(s) for change. Here, two cases are possible. Either the OMC was indeed the main reason for policy change and this is then openly communicated to the public, or the government just ‘blames’ the OMC to justify policy change which would otherwise be very difficult to be carried through. Weak blaming or credit claiming National governments and other policy actors can also present the OMC as a catalyst for policy change. This differs from the first category in that the OMC is not presented as the – or one of the – main reason(s) for policy change. Instead the OMC is described as an additional source of inspiration or pressure supporting policy change that the government or other policy actors are pursuing anyway. Again, there can be a difference in how politicians present the OMC’s role for national policy-making and its ‘real’ relevance. Either the OMC is used as an additional reform lever through ‘blaming’ the EU or it indeed informed the policy-making process to a certain degree. Another variant in this category is that national governments mention the OMC as an additional reason for policy change not so much because they want to justify this reform but ‘please’ the EU institutions and demonstrate compliance to their electorate. Denial and refusal It is also possible that the government and other domestic policy actors deny or refuse any influence of the OMC in interviews and official documents. Instead it will either present domestic policy change as purely due to internal reasons or it will defend its existing policy approaches and explain why the approach suggested by the OMC is not appropriate under the specific national circumstances. Such a denial or refusal of OMC influence again does not necessarily mean that the OMC actually had no influence. A government might choose this official response if it expects that admitting any major influence from the OMC would not be appreciated by the electorate and other political actors. Denying any

Conceptualizing the OMC

33

influence of the OMC can be related to the OMC as a whole or to specific aspects of the OMC, for example specific recommendations or descriptions of the member state’s approach in European OMC reports. ‘Uploading’4 Member state governments can also present themselves as having influenced the OMC agenda so that the OMC is now shaped by its domestic policy approach. The motives for this may be to explain to the public why domestic policy change is not required or to becalm possible Eurocritical policy actors at home by demonstrating that the OMC does not interfere with national policy-making.

Framework for analysing member state responses Policy actors’ responses to the OMC will differ between member states. To understand and explain these differences one must identify the factors that have an impact on policy actors’ perceptions of the OMC and their strategies of dealing with it. This section develops a set of factors that are important in this regard.5 Both factors at the EU level and at the member state level have to be considered in explaining differences and similarities between member state responses to the OMC. At the EU level, the OMC’s governance character and its embeddedness in the single market, monetary union and competitiveness agenda are important. The OMC’s governance character creates certain incentives for national actors in responding to this method in particular ways. On the one hand, the fact that the OMC is not legally binding provides national actors with the opportunity to interpret the OMC in a way that suits their national contexts. It even opens up the possibility to disregard addressing OMC objectives in national policy-making processes. On the other hand, the OMC’s benchmarking processes which publicise governments’ responses to the OMC provide opportunities for a variety of national policy actors to strategically refer to the OMC in national policy-making processes. The OMC’s embeddedness in the single market, monetary union and competitiveness agenda, which are more powerful than the OMC because most of them are based on legally binding provisions, possibly favours market-friendly interpretations and applications of the OMC.6 In addition to these factors at the EU level, differences at the member state level are crucial to explain variation of responses to the OMC. To define these different factors it is useful to consult Europeanization approaches that seek to develop theories on member state variation in

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The Open Method of Coordination

implementing EU law. The most important variable in the Europeanization approach is the degree of ‘goodness of fit’. It means that the better the fit of domestic institutions and policies with EU rules, the minor the pressure and therefore the likelihood for domestic policy change (Radaelli 2003a; Börzel 2005). A ‘misfit’ between domestic and EU policies is therefore regarded as a necessary precondition for Europeanization. A ‘misfit’, however, is not seen as a sufficient condition for domestic policy change and therefore the Europeanization approach also includes further ‘intervening variables’ in its explanatory framework. Authors in the Europeanization literature identified different ‘intervening variables’ which can support or hinder implementation of EU rules. For example, Radaelli proposed the following set of intervening variables: the ‘institutional capacity to produce change’, comprising veto players and scope and type of executive leadership, ‘timing of European policies’, and ‘policy structure and advocacy coalitions’ (Radaelli 2000: 15ff.). This Europeanization approach has to be adjusted if it is to be integrated into the two-level approach to analyse domestic responses to the OMC. First of all, the usefulness of the ‘goodness of fit’ variable needs to be discussed. In general it is certainly important to analyse the ‘fit’ between a member state’s performance in relation to OMC targets as well as between existing domestic social policies and OMC objectives. A large gap between the OMC and the national approach potentially increases the pressure for policy change towards the OMC targets and objectives. However, the larger the gap between the existing national approach and the OMC the more difficult it will be for a national government to adopt policies in line with the OMC. Moreover, the OMC is not legally binding and the only sanctions that the EU can apply in cases of ‘non-compliance’ are public recommendations to the member state and the publication of comparative performance studies. This lack of sanctions limits the pressure exerted by the OMC to adopt policies in line with the OMC. Therefore, the larger the misfit between the OMC and the existing national approach the more unlikely it might become that the OMC approach can be adopted. In the following section I discuss more concretely the different incentives for member state actors in responding to the OMC by considering factors such as the ‘goodness of fit’ between EU and member state approaches, the national political system and actor constellations as well as the historical relationship between a member state and the EU. This framework is not meant as a cause-effect model, in other words, I assume that these different factors can affect but do not determine domestic policy actors’ perceptions of and responses to the OMC.

35 Table 2.1

Factors in explaining member state responses

Factors at the two levels

Assumed influence

Factor at the EU level Non-bindingness of OMC

⫺

Quantitative indicators and benchmarking Embeddedness of OMC in framework of ‘negative integration’ Factor at the member state level ‘Goodness of fit’ Good performance in terms of OMC objectives and indicators

Good fit between OMC and domestic policies and institutions

⫹ ⫺

⫺

Little pressure for change

⫹

Few institutional hindrances to move closer to OMC approach

⫺

Little pressure for change

Political system and actor constellation Many veto points in political ⫹ system/fragmentation Government or government coalition supportive of the OMC Social Partners and NGOs Strong role of social partners

⫹

⫹

⫺

Intensive involvement of actors other than central government in NAP production Relationship to the EU Positive public opinion to EU integration Net-receiver of European Social Fund (ESF) and structural fund money Important role of EU for political and economic development Source: Author.

No sanctions in cases of ‘noncompliance’ Precise goals can be easily monitored and evaluated Strict fiscal policies can restrict resources for policy change towards the OMC

⫹

⫹ ⫹ ⫹

Many veto points provide more incentives to strategically use the OMC in the policy-making discourse A government supportive of the OMC is more likely to ‘use’ it in the policy making process Responsibilities to ‘implement’ OMC can be delegated to the social partners; incentive for social partners to refer to OMC Strong social partners can be a hindrance to integrate other nongovernmental policy actors in OMC processes The more policy actors involved the more actors are informed about the OMC Rules out disincentive for government to refer to OMC Incentive for government to present a story of strong OMC influence Incentive for government to present a story of strong OMC influence

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The Open Method of Coordination

‘Goodness of fit’ Here one can distinguish the ‘fit’ between quantitative OMC targets and the actual performance at the national level as well as the ‘fit’ between broader OMC objectives and existing national policies. A good fit between both of these categories can create different incentives for different actors at the national level to refer to the OMC. Governments and other actors who play an important role in dealing with the OMC nationally may be inclined to refer to the OMC in order to ‘claim credits’ for their good performance. If there is a high misfit, governments may also refer to the OMC in order to legitimize unpopular policy change (regardless of whether or not the OMC played an important role for policy formulation). Similarly, opposition parties and other non-governmental actors can refer to the OMC in order to put the government under pressure for introducing policies in line with the OMC. The ‘goodness of fit’ therefore does not clearly provide either incentives or disincentives for domestic policy actors to refer to the OMC. Other factors such as actor constellations, the popularity of existing or planned policies and public opinion towards the EU also play a role. Political system and actor constellations The degree of fragmentation and the number of veto-points in a political system can influence political actors’ incentives to refer to the OMC. The more fragmented a political system is and the more veto points it provides the more likely it is that the government has to consult with a broader range of policy actors about policy changes. Furthermore, political systems with many veto points provide more opportunities and incentives for non-governmental policy actors to take part in public debates about policy change. Therefore, the more numerous veto-actors are the more likely it may be that they strategically use references to the OMC in order to criticize the government and to demand policy change. This also applies to regional authorities. If they play a role in national policy making in a second legislative chamber like in Belgium or Germany or if they have own authorities in social policy making they have more incentives to refer to the OMC than in countries with a unitary political system. In addition, the actor constellation in a country can make a considerable difference for the response to the OMC. By ‘actor constellation’ I refer mainly to the conviction of the government party or coalition parties and their position to the OMC and the power relationship between the government and the opposition and other policy actors which is framed by the political system.

Conceptualizing the OMC

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Social partners and Non Governmental Organizations (NGOs) The role of social partners can influence the domestic response to the OMC in different ways. If social partners themselves refer widely to the OMC in policy-making processes or issue statements on the OMC the overall response to the OMC in a member state is more intense. If social partners strategically use the OMC this can produce additional incentives for the government since it has to response to the claims and requests of the social partners. Therefore, differences in the role of social partners can lead to different responses in two countries which otherwise belong to similar welfare families. How social partners deal with the OMC depends on their role in national policy-making (for example through consultation or neo-corporatist employment pacts) and on their degree of autonomy in ‘implementing’ parts of the OMC. If they play a strong role in national policy making and enjoy a large degree of autonomy they may have incentives to refer strategically to the OMC to pressure for policy change. The role of NGOs in the political system is also important for shaping the response to the OMC. If there is a strong partnership between the government and NGOs in social policy it is more likely that the government will also consult with them about the OMC. This will provide incentives for the NGOs to support their policy demands by referring to the OMC. Production of National Action Plans (NAPs) The production of the NAPs is the responsibility of national governments. Governments are asked by the EU Commission, however, to include as many policy actors as possible in drafting the plans. The more policy actors are involved by the government the more actors are informed about the OMC and therefore the more policy actors can ‘use’ the OMC as a resource in public discussions. Relationship between a member state and the EU The relationship between a member state and the EU plays a role in various ways. Firstly, if the electorate and public opinion are very critical about European integration and about the role of the EU in social policy in particular, the government will have very few incentives to refer to the OMC in order to legitimize domestic policy change. Equally, it would not make much sense for non-governmental policy actors to refer to the OMC in order to criticize the government or to pressure for policy change. Secondly, if EU membership historically played an important role for a member state in terms of economic and political development governments and non-governmental policy actors may have incentives to claim

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The Open Method of Coordination

compliance with the OMC and therefore to publicly refer to the OMC. Some member states also belong to the net-receivers of structural fund moneys. Since the structural funds, especially the European Social Fund, are (weakly) linked to parts of the OMC, particularly the European Employment Strategy, these countries may have financial incentives to present their policies as aligned with the OMC. These contextual factors will be taken into account in interpreting policy actors’ responses to the EES in Germany and the United Kingdom in Chapters 4 and 5. * * * To summarize, the chapter established three claims. It argued, firstly, that it is very difficult to directly examine the OMC’s ‘influence on national social policy. Therefore it is more useful to open up the ‘black box’ of policy-making and to investigate how policy actors ‘use’ the OMC and how the OMC consequently affects policy-making processes. Secondly, the chapter maintains that the OMC’s functioning has to be understood in combining top-down and bottom-up approaches. This perspective conceptualizes the OMC’s ‘influence’ as a ‘two-level game’ in which domestic policy-makers try to ‘upload’ their interests onto the OMC agenda and/or strategically ‘use’ the OMC to justify domestic policy reforms. From this perspective, the OMC functions as a potential catalyst for domestic policy reforms. Thirdly, the chapter argued that the ‘misfit’ concept developed in the Europeanization literature is not sufficient to explain why actors in different countries will respond differently to the OMC. It developed a brief typology of possible responses to the OMC and a framework for analysing responses. Apart from the ‘goodness of fit’ between the OMC and national policy approaches this framework comprises a range of further factors such as the character and political context of the OMC, the national political system, the role of social partners and the relationship between a member state and the EU. Chapter 4 compares these contextual factors at the national level in Germany and the UK and Chapter 5 analyses how policy actors in Germany and the UK responded to and ‘used’ the European Employment Strategy in policy-making processes.

3 The ‘Third Way’ in European Social Policy

Investigations of the OMC normally focus on its governance features. It is, however, equally important to examine its policy content and the model of social policy that it promotes. This chapter demonstrates that the OMC is based on a ‘third way’ social policy approach similar to that which informed ‘New Labour’s’ social policy agenda in the early to mid-1990s in the United Kingdom. About ten years after the revival of the term ‘third way’ in the public discourse it has largely disappeared again. In addition, in many EU countries in which ‘new’ social democrats were governing in the end of the 1990s, conservative and liberal-led governments have replaced their predecessors. This is, for instance, the case in France, Germany, Denmark, the Netherlands, Greece, Portugal and Finland. At the time of writing, also the ‘New Labour’ government in the UK is experiencing a crisis and declining public support. Although the political landscape has changed since the revival of the ‘third way’, this concept is still helpful for understanding the philosophy framing the new strategies across the EU for conciliating economic efficiency and social justice. This approach is also embodied in what the EU promotes as ‘European Social Model’ as well as in the individual social policy strands of the OMC. A further argument for using the term ‘third way’ is that Giddens himself presented his ideas which later developed into the ‘third way’ concept as stretching ‘beyond left and right’ (Giddens 1994). Although centre-right governments will probably adopt a different version of the ‘economic efficiency’ vs. ‘social justice’ mix than centre-left governments, both conservative and social democratic parties increasingly accepted the general idea of the ‘third way’ beyond ‘left’ and ‘right’.1 In this chapter I will firstly explain the model of the ‘third way’ and compare it with the EU’s concept of the ‘European Social Model’, then I will analyse the content of the OMCs in employment, social inclusion, 39

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The Open Method of Coordination

pensions, and health care. The policy analysis of the OMC will concentrate on the current state of affairs but also mention the most important changes which occurred over the years. Finally, I also analyse the tensions between different OMC objectives.

The ‘third way’ The ‘third way’ concept was reintroduced,2 for instance by Giddens, in the middle of the 1990s and became prominent for social democratic thinking in countries such as the USA, the UK and other European countries (albeit sometimes under different labels) (Surender 2004: 3). It was formulated as a middle ground between ‘old social democracy’ and ‘neo-liberalism’. Although different ‘third way’ discourses and policies can be identified in different countries (Merkel 2001; Bonoli and Powell 2004), the main and common ideas of the ‘third way’ can be summarized as follows. The ‘third way’ rests upon certain assumptions about social change and is presented as a political strategy to meet these new challenges. Giddens regards ‘globalisation’, the rise of the ‘knowledge economy’, new information technologies, a new role of women in society, and increasing individualism as important social changes (Giddens 2001: 3ff.). His approach of ‘reflexive modernity’ assumes that society has become so complex and fluid that the central state’s capacity to govern society has declined. Instead the state should enable self-organization and self-government so that individuals are able to enact agency which is based on reflexive action typical for societies in ‘reflexive modernisation’ (Finlayson 1999: 276). The ‘third way’ is designed as a response to these social changes and is based on the assumption that ‘traditional social democracy’, an interventionist state and Keynesian economic and employment policies are no longer adequate in ‘reflexive modernity’. The ‘third way’ redefines the relationship between the state, the market, ‘civil society’ and the individual. The state is no longer seen as an agent whose role has to be radically limited to guaranteeing liberty rights and the functioning of markets (liberalism), nor as actively intervening into economy and society (‘old’ social democracy). Instead, the role of the state is defined as somewhere in between liberalism and ‘old’ social democracy. The state enables, activates, moderates and assists the self-regulation of society, it is a ‘social investment state’ (Giddens 1999: 117ff.). All in all, the ‘third way’ supports a political model in which the powers of the central state are restricted and political responsibilities are gradually shifted to regional and local authorities. In addition, responsibilities are increasingly shared between state, market, and the ‘third sector’, that is ‘civil society’ and ‘communities’. Direct

The ‘Third Way’ in European Social Policy

41

participation of ‘civil society’, stakeholding, and ‘community cohesion’ are fostered by this approach with the aim to strengthen democracy and selfregulation of society. Furthermore, the ‘third way’ declared that the conflict between capital and labour belongs to the past. The state now takes over the role of a mediator between both sides, which, as well as other civil society actors, now play an active and responsible role for a prospering society and economy. This redefinition of the relationship between state, market and civil society and the individual has consequences for the design of economic, employment and social policies. Regarding economic policy, the ‘third way’ promotes supply-side economics and a sound fiscal policy. Keynesianism, deficit spending, and high taxes are regarded as too interventionist and therefore detrimental to the economy. The ‘third way’ also criticized ‘old style’ labour market policies where the state engaged in job creation, for example through providing a large public sector and where unemployment benefits aimed to maintain individuals’ socio-economic status. Instead the state’s role is conceived of as ‘activating’ potential employees through job counselling, training opportunities and, most importantly, conditionality of benefit receipt upon ‘actively seeking work’. Old style full employment meant state responsibility for maintaining a full-time employed, male-breadwinner workforce. The ‘third way’ concept of ‘full employment’ is different in that it seeks to expand labour market participation of women, young and older people, disabled, and other minority groups. The extension of employment mainly means an expansion of part-time and flexible jobs in the low-wage and low-qualification sector. The overall labour market is meant to be made more flexible, not only in terms of employment conditions but also in terms of qualifications and occupations. Also social policy is newly defined and addressed by ‘third way’ advocates. The main novelty is that the ‘third way’ type of social policy is not any more regarded as a trade-off to economic efficiency. Instead, economic effectiveness and social justice are seen as mutually reinforcing. The same applies to other dimensions previously conceived of as conflicting such as state and market, left and right, equality and freedom, rights and responsibilities, social security and flexibility as well as market-making and market-constraining measures. This leads to a new concept of social rights. Social rights are not conceptualized as citizenship rights but rather as liberal rights of opportunity conditional on the fulfilment of responsibilities against society and the state (Dean 2004).3 Slogans such as ‘a hand-up, not a hand-out’4 and ‘the rights we enjoy reflect the duties that we owe’ (the new clause IV in the Labour Party’s programme) characterized New

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The Open Method of Coordination

Labour’s election campaign in 1997. The ‘third way’ also adopted a new concept of ‘social inclusion’ which is closely linked to its labour market strategy. ‘Social exclusion’ and poverty are not any more explained through structural inequalities in society which are to be resolved through redistribution. Rather they are seen as something which can be resolved if the individual is ‘activated’ and integrated into the labour market (Levitas 1998: 7ff.). Integration into the labour market and the creation of a new ‘full employment’ society are regarded as the best safeguards against poverty and social exclusion. According to the ‘third way’, welfare benefit systems should be designed such that they provide incentives to take up work instead of potentially leading to a ‘dependency trap’ through generous unemployment and social assistance benefits. The aim of public expenditure containment also led to an acceptance by ‘third way’ politicians of a greater role of the private sector in social security, for example in pension and health policy (Bonoli and Powell 2004: 59f.). In summary, the ‘third way’ is based on a social theory which conciliates structure and agency and sees social development driven by reflexive activities of individuals; it redefines the relationship between state, market and civil society in which the state takes over the role of a moderator rather than a steersman; and it redefines the relationship between economic efficiency and social justice so that both are not regarded as trade-off but as mutually reinforcing each other. The aim of the ‘third way’ is to reconcile the tensions between freedom and equality. It is, however, an empirical question whether or not the policies which are linked to this ‘third way’ philosophy are successfully achieving their aims. In the following I will demonstrate that the ‘European Social Model’ and consequently also the Open Method of Coordination are closely linked to the concept of the ‘third way’.

The ‘European Social Model’ Even though the notion of the ‘third way’ does not appear in EU documents on the ‘European Social Model’ one can claim that the EU’s concept of the ‘European Social Model’ fits in many respects with the ‘third way’ approach. Since the OMC has been presented to ‘strengthen’ and ‘modernise’ the ‘European Social Model’ (European Council 2000a) one can argue that also the OMC is based on a ‘third way’ approach. First a few words about the concept of the ‘European Social Model’. It is not only used by the EU but in recent years a wide academic debate about this concept has emerged. There is, however, much disagreement amongst scholars regarding the meaning of the ‘European Social Model’. This debate comprises, for example, the question of whether the concept of the ‘European Social Model’ should be understood in a descriptive or in

The ‘Third Way’ in European Social Policy

43

a normative sense and whether something like the ‘European Social Model’ exists in the face of the remarkable differences across European welfare states (Baldwin 1996; Kaelble 2000; Aust et al. 2002; Offe 2003b). Kaelble, for instance, stated that European societies share particular common features which are deeply anchored in similar historical settings and developments, such as social policies based on individual rights, certain patterns in public social spending and a European level of social policy. Offe emphasized that European societies have developed institutions continuously dealing and therefore stabilizing social conflicts (Offe 2003b). Baldwin pointed out that the term ‘European social model’ has to be perceived as a normative rather than a descriptive concept as well as to the methodological difficulties of identifying the similarities between European societies (Baldwin 1996). This chapter does not aim to clarify these questions but focuses on how the EU defines the ‘European Social Model’. The aim is to find out whether there are similarities between the EU’s concept of the ‘European Social Model’ and the ‘third way’. One main usage of the term ‘European Social Model’ in EU publications is to create the image of a distinct European model and contrasting it to other models in the world such as the USAmerican or the Japanese-Asian model. The European Commission’s White Paper on social policy of 1994 defined the ‘European Social Model’ as being based on a set of ‘shared values’, namely ‘democracy and individual rights, free collective bargaining, the market economy, equality of opportunity for all and social welfare and solidarity’ (European Commission 1994a: 9). At the same time, it stressed that Europe is based on internal diversity and regarded this as supporting the EU’s competitiveness (European Commission 1994a: 12). In the 1994 White Paper a similarity between the ‘European Social Model’ and the ‘third way’ social policy concept becomes apparent. The White Paper stresses that social policy should not be regarded as detrimental to economic efficiency but as potentially contributing to it: The pursuit of high social standards should not be seen only as a cost but also as a key element in the competitive formula. . . . In the Union, increased confidence can come only from a reconciliation between economic growth policies and their translation into higher social development with upgraded living standards for all. Knowing that this may give the Union its competitive edge will also equip the Union to have a stronger external influence on the world stage (European Commission 1994a: 10). The discourse about the ‘European Social Model’ at the EU level became revitalized in 2000 when the Open Method of Coordination was

44

The Open Method of Coordination

launched. The Open Method of Coordination is described in the Lisbon and Nice Council Conclusions as the means to ‘strengthen’ and ‘modernise’ the ‘European Social Model’ (European Council 2000a: para. 15, annex; European Council 2000b: para. 5). When the ‘European Social Model’ is described we find many parallels to the descriptions of the ‘third way’. First, it is again emphasized that ‘economic growth and social cohesion are mutually reinforcing’ (European Council 2000a: annex para. 9). The Social Agenda annexed to the Nice Conclusions even emphasizes that this agenda has a ‘dual objective’: the Agenda must strengthen the role of social policy as a productive factor; it must enable it to be at the same time more effective in the pursuit of its specific aims concerning the protection of individuals, the reduction of inequalities, and social cohesion (European Council 2000a: annex para. 9). This formulation promotes the view that social policy can contribute to economic success. Moreover, the Social Agenda contains further ‘third way’ aspects such as ‘investing in people’ and the move towards a ‘knowledge economy’ (European Council 2000a: annex para. 7), developing an ‘active and dynamic welfare state’ (ibid.), increasing ‘the level of participation in the employment market’ since ‘more and better jobs are the key to social inclusion’ (ibid.: para. 10), and guaranteeing the ‘sustainability of retirement pension systems’ (para. 10). Finally, it is also mentioned that all this should be achieved by mobilising ‘all players’ (ibid.: para. 8). In summary, the EU’s concept of the ‘European Social Model’ emerged at a similar time and parallel to the ‘third way’ concept, namely in the early 1990s. While the EU’s notion of the ‘European Social Model’ is less theoretical and encompassing than the ‘third way’ approach, both concepts share important aspects such as the mutual reinforcement of economic efficiency and social justice, supply-side economics, a rejection of demandside Keynesian economic and employment policy, and a model of social inclusion through labour market participation and ‘activation’. The statement of the Nice Council and the 2000 Social Agenda that the OMC shall reinforce and/or modernize the ‘European Social Model’ is an indicator that the OMC is equally based on a ‘third way’ model. This can be demonstrated by examining the policy content of various branches of the OMC.

The policy content of the Open Methods of Coordination This section first analyses the policy content of the economic policy coordination as the earliest institutionalized form of the Open Method of

The ‘Third Way’ in European Social Policy

45

Coordination, then the European Employment Strategy and finally the Open Method of Coordination in social inclusion, pension, and health policy. As explained in the introduction, this book uses a broad understanding of the term ‘Open Method of Coordination’ subsuming also the European Employment Strategy and Economic Policy Coordination under it if it does not refer to any of the OMC strands in particular. Economic and employment policy coordination The OMC has been first applied by the EU in the area of economic policy. The Single European Act introduced a new chapter on ‘co-operation in economic and monetary policy’ ‘in order to ensure the convergence of economic and monetary policies’ (Art. 20 of the Single European Act, see European Communities 1987). The Maastricht Treaty created the legal basis for a more formalized policy coordination in economic policy and the development of non-binding guidelines and recommendations (Art. 103 and 103a). The convergence of economic performances has become relevant through the introduction of the European Monetary Union because high inflation in one country could have detrimental effects for other countries of the Euro area. Therefore, those member states participating in the Euro became interested in co-ordinating economic policies at the European level (Hodson and Maher 2001). The first Broad Economic Policy Guidelines were drafted in the end of 1993 (European Council 1993: 5). According to the European Council, economic policy coordination aimed at economic ‘recovery and investment’ through ‘stable and coherent economic and monetary policies’, low inflation rates, and ‘controlled public expenditure’ and consequently lower interest rates (ibid.). Later European Councils emphasized more directly that a European strategy of economic policy coordination based on public expenditure containment and low inflation policy should lead to employment growth and the reduction of high unemployment levels in Europe (Council of the European Union 1998a: 2). The Broad Economic Policy Guidelines cover mainly macroeconomic, microeconomic and wage policy, all oriented at stability and growth, low public deficits, price stability, the functioning of the internal market, the creation of a ‘knowledge economy’, and sustainable development.5 These elements of the Broad Economic Policy Guidelines are coherent with the ‘third way’s’ supply-side approach regarding economic policy based on ‘low inflation’, ‘limit[ed] government borrowing’ and the use of ‘active supply-side measures to foster growth and high levels of employment’ (Giddens 2000: 73). Box 3.1 shows the current set of the economic policy co/ordination guidelines (macro- and micro-economic policies) which are now part of the ‘Integrated Guidelines’.

46

Box 3.1

Integrated Guidelines, 2005–2008

Macroeconomic policies GL 1 Securing economic stability to raise employment and growth potential GL 2 Safeguard long-term economic sustainability in the light of Europe’s ageing population GL 3 Promote a growth, employment-orientated and efficient allocation of resources GL 4 Ensure that wage developments contribute to growth and stability and complement structural reforms GL 5 Promote greater coherence between macroeconomic, structural and employment policies GL 6 Contributing to a dynamic and well-functioning EMU Microeconomic policies GL 7 Increase and improve investment in research and development, in particular by private business, with a view to establishing the European Knowledge Area GL 8 Facilitate all forms of innovation GL 9 Facilitate the spread and effective use of ICT and build a fully inclusive information society GL 10 Strengthen the competitive advantages of Europe’s industrial base GL 11 Encourage the sustainable use of resources and strengthen the synergies between environmental protection and growth GL 12 Extend and deepen the internal market GL 13 Ensure open and competitive markets inside and outside Europe and reap the benefits of globalisation GL 14 Create a more competitive business environment and encourage private initiative through better regulation GL 15 Promote a more entrepreneurial culture and create a supportive environment for SMEs GL 16 Expand, improve and link up European infrastructure and complete priority cross-border projects Employment guidelines GL 17 Implement employment policies aiming at achieving full employment, improving quality and productivity at work, and strengthening social and territorial cohesion

The ‘Third Way’ in European Social Policy

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GL 18 Promote a lifecycle approach to work GL 19 Ensure inclusive labour markets, enhance work attractiveness, and make work pay for job-seekers, including disadvantaged people and the inactive GL 20 Improve matching of labour market needs GL 21 Promote flexibility combined with employment security and reduce labour market segmentation, having due regard to the role of the social partners GL 22 Ensure employment-friendly labour cost developments and wage-setting mechanisms GL 23 Expand and improve investment in human capital GL 24 Adapt education and training systems in response to new competence requirements Source: Council of the European Union (2005b); Council of the European Union (2005a).

The European Employment Strategy (EES) has, from its beginning, been closely related to EU economic policy coordination. Concrete plans for co-ordinating member states’ employment policies have been discussed since the European Council in Essen, 1994. The formal basis for employment policy coordination was introduced by the Treaty of Amsterdam. These provisions contained the requirement that the employment guidelines had to be coherent with the Broad Economic Policy Guidelines (Art. 126, 1, Treaty of the European Communities). The link between the two strategies is therefore established by EU law. The content of the European Employment Strategy is also fully coherent with a ‘third way’ employment policy agenda, focussing at supply-side measures, promoting ‘employability’ and ‘activation’, making work pay, life long learning and flexicurity. This interpretation of the European Employment Strategy is supported by several OMC scholars. One of them is J. Kenner who notes that: A study of the Employment Title [the EES’ legal base in the Treaty of Amsterdam M.B.] reveals that, both in language and form, the new provisions are in line with what I have sought to describe as “third way” thinking’ (Kenner 1999: 48). ‘True to the “third way” approach the Employment Title is about reconciling themes. High levels of employment and social protection are linked with competitiveness. Security and flexibility are mutually compatible. It was with these goals in mind that the “Luxembourg process” was launched (Kenner 1999: 51).6

48

The Open Method of Coordination

From 1998 to 2002, the EES guidelines were structured in four pillars. In the early EES, the first pillar ‘improving employability’ promoted the move from ‘passive’ to ‘active’ and ‘preventative’ labour market policy through work incentives in the social security and tax system, training measures and a general ‘life long learning’ approach. The second pillar ‘developing entrepreneurship’ aimed to facilitate the start-up of businesses and selfemployment. Pillar three ‘encouraging adaptability’ promoted the modernization of work organization and the linkage between labour market flexibility with social security. These measures were mainly directed at the ‘social partners’ and to be included in their negotiations and agreements. The fourth pillar ‘strengthening the policies for equal opportunities’ made proposals for closing gender gaps in the labour market, the conciliation of work and family life and providing an inclusive labour market which does not discriminate against gender, age, ethnic minorities and disabled people (Council of the European Union 1998b). The number of guidelines ranged from 18 to 22. At the mid-term review in 2001, EU policy actors agreed that the pillar structure was too complex and there were too many guidelines. This led to a reform of the EES in 2003 according to which the pillar structure was removed and the number of guidelines reduced to ten (though still containing several sub-paragraphs). Since 2003, the number of guidelines has not changed but the EES became integrated with the economic policy coordination to a common set of ‘Integrated Guidelines’ (see Box 3.1). This analysis demonstrates that the most important features of ‘third way’ labour market policy reappear in the European Employment Strategy: supply-side labour market policy which focuses on improving the fit between supply and demand of labour through ‘activation’ and training, widening labour market participation through ‘making work pay’, active ageing and anti-discrimination policies, and combining flexible labour markets with job security. The European Employment Strategy is not only similar to ‘third way’ labour market policy concepts in terms of its content but also in terms of certain governance aspects. This strategy asks, for example, to apply a ‘partnership’ approach in which unions and employers are closely involved in policy-making and also take over responsibility for the implementation of this strategy. In addition, further actors such as regional and local authorities and, where appropriate, other non-governmental actors are to be involved in policy-making and implementation. Another governance characteristic of the European Employment Strategy is that it uses quantitative targets in some areas in order to render the strategy more effective. Quantitative targets are an instrument for

The ‘Third Way’ in European Social Policy

49

benchmarking and evaluation since they facilitate the comparison of labour market performances of individual member states. Some of the quantitative targets are part of the European Employment Strategy since 1997, for example the targets to provide measures of active labour market policy for young people and the long-term unemployed before six or twelve months of unemployment respectively. The 2000 Lisbon Council defined the general employment rate targets aiming at an overall employment rate of 70 per cent, a female employment rate of 60 per cent, and an employment rate of 50 per cent of older workers by 2010. These targets are still part of employment guideline 17. In 2003, further quantitative targets were established. These targets are still annexed to the employment guidelines (see Box 3.2).7 Some important examples are that the effective average exit age from the labour market should be reduced by 5 years by 2010 (compared to 59.9 in 2001), that the number of the 22-year olds completing upper secondary school should be raised to 85 per cent by 2010 and that the number of childcare places should be considerably raised for different age groups of children (Box 3.2).

Box 3.2

Quantitative targets in the European Employment Strategy

The following targets and benchmarks were agreed in the context of the European Employment Strategy in 2003 – that every unemployed person is offered a new start before reaching 6 months of unemployment in the case of young people and 12 months in the case of adults in the form of training, retraining, work practice, a job or other employability measure, combined where appropriate with on-going job search assistance, – that 25 % of long-term unemployed should participate by 2010 in an active measure in the form of training, retraining, work practice, or other employability measure, with the aim of achieving the average of the three most advanced Member States, – that jobseekers throughout the EU are able to consult all job vacancies advertised through Member States’ employment services, – an increase by five years, at EU level, of the effective average exit age from the labour market by 2010 (compared to 59.9 in 2001), – the provision of childcare by 2010 to at least 90% of children between 3 years old and the mandatory school age and at least 33% of children under 3 years of age,

50

The Open Method of Coordination

– an EU average rate of no more than 10% early school leavers, – at least 85% of 22-year olds in the EU should have completed upper secondary education by 2010, – that the EU average level of participation in lifelong learning should be at least 12.5% of the adult working-age population (25 to 64 age group). Source: Council of the European Union (2005a: 27).

An analysis of the objectives of the European Employment Strategy reveals that there are considerable tensions between different goals. One of the tensions exists between the quality of work and the ‘new full employment’ approach of the strategy. Full employment in the European Employment Strategy does not mean full-time jobs for the whole workforce but can only be achieved by extending the low-wage and low-skills sector. The aim of ensuring ‘quality of jobs’ entered the European Employment Strategy in 2001. The promotion of job ‘quality’ can be interpreted in two different ways but both of them can be regarded as competing with the aim of creating higher employment levels. On the one hand, job quality can be meant to avoid the establishment of a large job sector with insecure and dissatisfying jobs. If ensuring the quality of jobs is taken seriously it could mean a lower rate of job creation in the low-wage and low-skills sector. On the other hand, the quality of jobs can be interpreted as a means to increasing productivity. Indeed, the employment guidelines mostly link the aim of job quality to productivity. Higher productivity is, however, also a detriment to job creation since fewer highly productive workers can produce the same economic outcome than a larger number of less productive workers. In addition, it is difficult to measure the ‘quality of work’. The Council of the European Union called for the development of quantitative indicators regarding the quality of work (Council of the European Union 2001b) but there is still no clear set of quality of work indicators in the latest portfolio on employment indicators (Employment Committee 2005). In this portfolio some general indicators such as employment rates and the youth unemployment ratio have been assigned to measure the quality of work. However, the appropriateness of such general indicators to measure the quality of work must be questioned.8 Overall, measuring the ‘quality of work’ received less attention in preparing the indicator portfolio than indicators for other goals such as new ‘full employment’ which is potentially detrimental to the quality of jobs.

The ‘Third Way’ in European Social Policy

51

A second tension exists between the aim to render labour markets more flexible and to provide for ‘employment security’. The aim is to find innovative ways to combine both objectives, for example through making dismissal of employees easier whilst providing generous unemployment benefits. The latter will, however, be opposed by governments of countries with high public deficits and high unemployment rates. Thirdly, there is a tension between some aspects of the EES and the Stability and Growth Pact, for example the goal to provide meaningful training and counselling to unemployed people and the reduction of public deficits as demanded by the Stability and Growth Pact. This is because meaningful active labour market policies are expensive and would counteract the goal to reduce public deficits (Ball 2001: 362ff.; Goetschy 2002: 421; Gonäs 2004: 139, 142f.). Furthermore, the latest set of guidelines for 2005–2008 (Council of the European Union 2005a) suggests that preference is given to labour market flexibility over security and employment growth over the quality of jobs. This becomes apparent when analysing the concrete formulations of the guidelines and the order in which the different aspects are addressed. Quality of jobs is only mentioned together with labour productivity which means that it is primarily seen as a means to increase productivity through job satisfaction rather than a goal in its own. Also the security of jobs is only the second aspect mentioned after the flexibility of jobs. Overall the aim to widen labour market participation for all is the priority of the European Employment Strategy. Structural reasons for unemployment are not mentioned in the strategy, therefore the role of the state is limited to ‘activate’ people to enter or remain in the labour market in order to increase employment rates. The OMC in social inclusion and protection The OMC in social inclusion and protection is also linked to a ‘third way’ approach. Due to this, these OMC initiatives also contain several conflicting policy objectives. The idea to coordinate member state policies in the area of social protection and to aim at convergence instead of harmonization was already promoted by the 1989 Social Action Programme (Commission of the European Communities 1989: 27f.). In 1992, the Council adopted two recommendations ‘for the convergence and “sufficient funding” of social protection objectives’ (Council of the European Union 1992a; Council of the European Union 1992b; Geyer 2000: 183ff.). A fully-fledged coordination strategy in this area was, however, only realized when the OMC in social inclusion and protection were launched at the Lisbon Council in 2000. Thereby the OMC became a part of the Lisbon strategy’s aim of

52

The Open Method of Coordination

establishing the ‘most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion’ by 2010 (European Council 2000b: para. 5).9 Since 2000, the OMC in social inclusion and social protection – the latter consisting of pensions and health care – developed with a different pace and the instruments applied varied between these areas. However, after the mid-term review of this strategy demonstrated insufficient goal achievement (High Level Group 2004), the Lisbon Strategy was re-organized. It became refocused on economic and job growth while the social policy OMCs moved into the background. This reorganization also led to the integration of the OMC in social inclusion, pensions and health care into one single strategy in 2005 (Commission of the European Communities 2005b). Now, a joint set of objectives and indicators exists while the reporting mechanisms related to the OMC in social inclusion and protection have been integrated into a single monitoring cycle. Overall, the OMC in social inclusion and social protection is applied in a less stringent way than in the field of employment. The objectives are less specific, no ‘guidelines’ exist; the objectives are not adopted by the Council of the European Union but only by the European Council which is not a formal institution in the Treaty of the European Communities; the Council of the European Union cannot issue recommendations to the member states; and the surveillance processes are not as tightly organized as in the EES. In addition, an explicit treaty basis for the OMC in social inclusion and protection is lacking. The OMC is indirectly mentioned in several policy areas in the Treaty on a Constitution for Europe (European Union 2004), however, in spring 2007 it became clear that the treaty will not be ratified in this version. In the following I will describe the different contents of the OMC social inclusion, pension and health care. Also these OMC initiatives are based on very similar principles promoted by the ‘third way’. The Joint Reports on Social Inclusion and Social Protection in 2005 and 2006 both emphasized the ‘third way’ idea that social protection can contribute to economic efficiency (Commission of the European Communities 2005a: 3; Council of the European Union 2006b: 6). The OMC social inclusion assumes that social inclusion and the eradication of poverty is mainly brought about through labour market participation. It also focuses on the coordination between different levels of government and the inclusion of all relevant actors in the policy process. The OMC pensions is primarily concerned with re-designing pensions systems so that they can cope with ageing populations and limited public resources for social security systems.

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53

It therefore supports to strengthen the role of private pension schemes. In addition, it seeks to strike a balance between ‘adequate’ and ‘sustainable’ pensions. This means that pensions should allow older people to ‘maintain, to a reasonable degree, their living standard after retirement’ while governments have to find ways to finance pensions such that they enable sound public finances. A similar balance is tried to be achieved in the area of health care where the OMC demands to ensure ‘accessible, high-quality and sustainable healthcare and long-term care’ (see objectives of all three strategy in Box 3.3). The common objectives for the OMC social inclusion, pensions and health care also contain three ‘overarching’ objectives which have to be applied in all three areas. One of these objectives demands that there is an ‘effective and mutual interaction between the Lisbon objectives of greater economic growth, more and better jobs’ and the social policy OMC objectives (Commission of the European Communities 2005b: 5f.). Since 2000, the Social Protection Committee has been developing a broad range of quantitative indicators in the OMC social inclusion and protection. These indicators serve to measure the performance of member states in terms of social policy outcomes. In contrast to the EES, no quantitative targets have been set in the OMC inclusion and social protection. Targets are not only used to measure performance but also to define concrete goals to be achieved at a certain point in time. In June 2006, the European Commission (2006d) published a portfolio of indicators for the OMC in social inclusion, pensions and health. This 50 page portfolio defines how member states should measure, for example, the ‘risk-of-poverty’, the intensity of the ‘risk-of-poverty’,

Box 3.3

Common objectives for the OMC in social inclusion and social protection

The overarching objectives of the OMC for social protection and social inclusion are to promote: (a) social cohesion, equality between men and women and equal opportunities for all through adequate, accessible, financially sustainable, adaptable and efficient social protection systems and social inclusion policies; (b) effective and mutual interaction between the Lisbon objectives of greater economic growth, more and better jobs and greater social cohesion, and with the EU’s Sustainable Development Strategy;

54

(c) good governance, transparency and the involvement of stakeholders in the design, implementation and monitoring of policy. The following objectives apply to the different strands of work: A decisive impact on the eradication of poverty and social exclusion by ensuring: (d) access for all to the resources, rights and services needed for participation in society, preventing and addressing exclusion, and fighting all forms of discrimination leading to exclusion; (e) the active social inclusion of all, both by promoting participation in the labour market and by fighting poverty and exclusion; (f) that social inclusion policies are well-coordinated and involve all levels of government and relevant actors, including people experiencing poverty, that they are efficient and effective and mainstreamed into all relevant public policies, including economic, budgetary, education and training policies and structural fund (notably ESF) programmes. Adequate and sustainable pensions by ensuring: (g) adequate retirement incomes for all and access to pensions which allow people to maintain, to a reasonable degree, their living standard after retirement, in the spirit of solidarity and fairness between and within generations; (h) the financial sustainability of public and private pension schemes, bearing in mind pressures on public finances and the ageing of populations, and in the context of the three-pronged strategy for tackling the budgetary implications of ageing, notably by: supporting longer working lives and active ageing; by balancing contributions and benefits in an appropriate and socially fair manner; and by promoting the affordability and the security of funded and private schemes; (i) that pension systems are transparent, well adapted to the needs and aspirations of women and men and the requirements of modern societies, demographic ageing and structural change; that people receive the information they need to plan their retirement and that reforms are conducted on the basis of the broadest possible consensus.

The ‘Third Way’ in European Social Policy

55

Accessible, high-quality and sustainable healthcare and long-term care by ensuring: (j) access for all to adequate health and long-term care and that the need for care does not lead to poverty and financial dependency; and that inequities in access to care and in health outcomes are addressed; (k) quality in health and long-term care and by adapting care, including developing preventive care, to the changing needs and preferences of society and individuals, notably by developing quality standards reflecting best international practice and by strengthening the responsibility of health professionals and of patients and care recipients; (l) that adequate and high quality health and long-term care remains affordable and financially sustainable by promoting a rational use of resources, notably through appropriate incentives for users and providers, good governance and coordination between care systems and public and private institutions. Long-term sustainability and quality require the promotion of healthy and active life styles and good human resources for the care sector. Source: Document on new set of objectives endorsed by the European Council in March 2006 http://ec.europa.eu/comm/employment_social/social_inclusion/ docs/2006/objectives_en.pdf, accessed 14 May 2006.

income inequalities, educational achievements, the sustainability of the social protection systems, the adequacy of public pensions to prevent old-age poverty, health inequalities and inequalities in access to health and regional cohesion. Indicator development is a major step towards an EU-wide comparison of social policy outcomes. Indicators are, however, not only statistical instruments, but they are also connected to policy approaches – in this case to the ‘third way’ approach of ‘activation’ and combining financial sustainability, economic efficiency and social justice. Indicators can therefore have a considerable impact on policies. This will be discussed in more detail in Chapter 6. Finally, what has been said about the tensions between certain goals within the EES and between EES goals and the Stability and Growth Pact also applies to the OMC in social inclusion and protection. There is, for example, obviously a tension between ensuring the financial sustainability of the social protection systems and the goal to eradicate poverty

56

The Open Method of Coordination

of all age groups, particularly child and old-age poverty. ‘Financial sustainability’ normally involves the reduction or stabilization of social protection expenditure while fighting poverty requires increasing social expenditure. These two aims are therefore in conflict. Empirical studies are required to see which aspects of the OMC in social inclusion and protection are given priority at the member state level and how member states try to achieve these contradictory goals at the same time. In conclusion, the examination of the ‘third way’ approach, the EU’s concept of the ‘European Social Model’ and the various strands of the OMC demonstrated that there are obvious similarities between these concepts. The ‘third way’ and the EU’s concept of a ‘European Social Model’ entered the political agenda at a similar time in the early to mid1990s. The ‘third way’ is more encompassing than the concept of the ‘European Social Model’ because it provides a theoretical understanding of society and social change after the end of the cold war. However, the social policy approach of the EU’s ‘European Social Model’ is compatible with ‘third way’ assumptions. Economic policy coordination and plans to establish a European Employment Strategy were developed at about the same time as discussions on the ‘European Social Model’ entered the EU agenda. When the instruments of the OMC were extended to social inclusion, pension and health care, the link between the OMC and the ‘third way’-based ‘European Social Model’ were explicitly mentioned by various EU institutions (Commission of the European Communities 2000; European Council 2000a). The OMC can therefore be regarded as a social policy strategy influenced by the ‘third way’ philosophy. This chapter identified various contradictory policy goals within the OMC framework. Empirical examination is therefore required to see whether these conflicting objectives can be equally implemented at the member state level. Such an empirical analysis will be presented in Chapters 5 and 6. Chapter 5 will contain an analysis of how the UK and German governments implemented the EES in national labour market policy-making. In Chapter 6 the OMC’s effectiveness will be examined in general.

Part II Member State Responses

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4 Institutions and Actors

This and the following chapter present the results of the empirical examination on how policy actors in Germany and the United Kingdom (UK) responded to and ‘used’ the European Employment Strategy (EES) in national policy-making processes.1 The context of institutions, actor constellations and labour market situation matters in order to understand why policy actors deal differently with the OMC in various member states. Therefore this chapter compares these contextual aspects in Germany and the UK and develops hypotheses as to their consequences for responding to the OMC. These background conditions are not treated here, however, as ‘causes’ for the OMC’s ‘influence’ on national policies like in a cause-effect model. Rather the context factors are regarded as framing, but not determining, national policy actors’ responses and usages of the OMC in policy-making processes. The context conditions that will be looked at here are derived from the framework developed in Chapter 2. Therefore this chapter discusses the ‘goodness of fit’ between the EES and national labour market performance as well as policy approaches in both countries, the political system and actor constellations, the role of the social partners, the processes of National Action Plan production and Germany’s and the UK’s relationship to the EU.

‘Goodness of fit’ The concept ‘goodness of fit’ plays a crucial role in the Europeanization literature (Börzel and Risse 2000; Radaelli 2003a, see Chapter 2). It is linked to the hypothesis that the larger the gap between EU legal provisions and national policy approaches the greater the pressure for implementation and therefore Europeanization. A ‘misfit’ between the EU provisions and national policies is therefore regarded as a necessary but 59

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Member State Responses

not sufficient condition for Europeanization – further conditions must apply such as ample resources and favourable actor constellations. The ‘goodness of fit/misfit’ concept has then been applied to research on the OMC in early publications, for example by De la Porte and Pochet (2002c: 55ff.). De la Porte and Pochet argued that the OMC will be more influential when there is a broader gap between the policy approach of the OMC and the existing national approach. Since then the ‘goodness of fit’ argument has been more or less explicitly used by various OMC scholars (Rubery 2005; Zeitlin et al. 2005; Linos 2006; López-Santana 2006). Analysing the ‘goodness of fit’ between the EES and national approaches means comparing the quantitative EES targets with national labour market performance as well as the EES policy approaches with existing policies at the national level. Overall, the UK’s labour market performance is closer to the EES targets than Germany’s. For example, in 2000 the EU has set performance targets for employment rates to be reached by 2005 and 2010. At that time, the UK already achieved the 2005 targets or was very close to meeting them. This was not the case in Germany. In 2005, the UK outperformed all EES targets for 2010 while Germany only reached the target for the female employment rates. The calculation of this rate does not acknowledge, however, the large proportion of part-time work. If the female employment rate is measured in full-time equivalents, the EES target would not be achieved in either of these countries. The full-time equivalent female employment rate in the UK was 51.5 per cent and 45.2 per cent in Germany in 2005 (European Commission 2006a) (compared to the EU target of 60 per cent). Also regarding other EES targets, the UK performance is closer to them in most cases as compared to Germany. The UK claims, for example, to offer ‘a new start’ to all young unemployed before 6 months of unemployment and to all adult unemployed before 12 months at the latest.3 In contrast, in Germany 10.4 per cent of the young unemployed and 14.1 per cent of the adult unemployed were reported not having been offered a ‘new start’ within these periods in 2003 (European Commission 2006c: 56f.). Whilst not achieving the EES goal, educational achievement levels are higher in the UK than in Germany (in Germany they are in fact dropping since years) and many more adults participate in life long learning measures. The effective age of labour market exit is also higher in the UK than in Germany. The only EES indicators where Germany is closer to the targets than the UK are the rates of early school leavers and the provision of childcare for children between the age of three and mandatory school age. However, the situation regarding early school leavers has more rapidly improved in the UK than in Garmany (from 18.4 per cent

Table 4.1

Employment rates in Germany and the UK (%)

Overall Female Older workers (55–64)

2005 target

2010 target

EU-25 2000

EU-25 2005

UK 2000

UK 2005

Germany 2000

Germany 2005

67 57 –

70 60 50

62.4 53.6 36.6

63.8 56.3 42.5

65.4 64.7 50.7

71.7 65.9 56.9

65.6 58.1 37.6

65.4 59.6 45.4

Source: Eurostat, download 22 June 2006.

Table 4.2

Performance regarding EES targets in Germany and the United Kingdom Germany

Share of young unemployed who are still unemployed after 6 months and not been offered a ‘new start’2 Share of adult unemployed who are still unemployed after 12 months and not been offered a ‘new start’ 25% of the long-term unemployed participate in a measure of ALMP by 2010 At least 85% of 22 year olds should have completed upper secondary education by 2010 12.5% of adult working age (25–64) population participating in life long learning by 2010 EU average of no more than 10% early school leavers by 2010

10.4%

(2003)

0

(2004)

14.1%

(2003)

0

(2004)

23% 74.4% 71.0% 5.2% 8.2% 14.9% 13.8% 89.8% 8.5% 60.6 61.3

(2004) (2000) (2005) (2000) (2005) (2000) (2005) (2002) (2002) (2001) (2004)

90% childcare for children between 3 and mandatory school age 33% childcare for children 0–3 Increase of effective average labour market exit age of 5 years until 2010 (from average 59,9 in 2001) Sources: Eurostat, download 22 June 2006; European Commission (2006c).

United Kingdom

24% 76.4% 77.1% 21.0% 29.1% 18.4% 14.0% 29.4% 10.8% 62.0 62.1

(2004) (2000) (2005) (2000) (2005) (2000) (2005) (2002) (2002) (2001) (2004)

61

Target

62

Member State Responses

in 2000 to 14.0 per cent in 2005 in the UK while the figure only dropped by a percentage point in Germany to 13.8 per cent in 2005. Both figures are still well away from the 10 per cent target though. Regarding childcare provision for children aged between three and mandatory school age, the UK still lags far behind the target of 90 per cent since provision only covered 29.4 per cent in 2002 (latest available data) (European Commission 2006c: 49). There are, however, areas in which no quantitative EES targets exist and where the UK performs better than Germany. For example, the EU Commission particularly criticized high rates of long-term unemployment in Germany (Council of the European Union 2003b: 64ff.; Council of the European Union 2004b: 67ff.). In Germany, long-term unemployment of 4.0 per cent was slightly higher than the EU-25 average of 3.9 per cent in 2005, while the UK figure is below the EU-25 average with a 1.0 per cent long-term unemployment rate. Although youth unemployment used to be lower in Germany than in the UK until the early 1990s, the ratio has now been reversed with a youth unemployment rate of 12.9 per cent in the UK and of 15.0 per cent in Germany in 2005. Overall, therefore, the UK performed better than Germany in terms of the EES targets. It should be mentioned however, that there are also less favourable aspects of the UK labour market, for example the high rate of male inactivity (30.6 per cent in 2005). In addition, the number of people receiving incapacity benefits is rising which points to a considerable number of hidden unemployed people (Beatty and Fothergill 2003b; Beatty and Fothergill 2003a). These issues have also been addressed in the latest Joint Employment Report and EES recommendations (Council of the European Union 2004a: 58; Council of the European Union 2006a: 11) and the UK government has recently introduced a reform bill to tackle this issue (House of Commons 2006). Furthermore, the share of children (0–17 years old) living in jobless households is higher in the UK than in Germany: in 2005 this figure remained at 16.5 per cent for the UK and 10.9 per cent for Germany. The UK was also closer to the EES labour market policy approach than Germany when the EES was launched in November 1997. Compared to the UK, the labour market is more regulated and non-wage labour costs are considerably higher in Germany (European Commission 2006e: 59). On the other hand, German labour market policies are based on active measures since the late 1960s and the German system of vocational training is more organized and effective than in the UK (Upchurch 1997; Whiteside 1998; Finegold 1999; Manow and Seils 2000; Clasen 2002; Clasen 2005: 53ff.). In Germany a Christian-democratic/liberal coalition was in place when the EES was introduced. The government had started initiatives to render

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the labour market more flexible and to move towards a more ‘preventative’ approach in the mid-1990s. In October 1998 a new social-democratic/ green government was elected. The new government revoked some of the cuts introduced by its predecessors in order to establish a more ‘traditional’ social democratic labour market approach focussing on active labour market policies and not inimical against state intervention to create jobs. In the UK, the situation was different. The Labour party had developed a new ‘third way’ labour market policy agenda whilst in opposition and had just entered government when the EES was launched. Therefore many labour market policies which fitted very well with the EES agenda were already planned or partially in place in the UK at the time when the EES was adopted. Although in Germany policy reforms similar to the EES were on the agenda before late 1997, the labour market policy approach was still not framed in the way promoted by the EES. Thus a greater pressure existed in Germany to adjust policies to the EES agenda than in the UK. This hypothesis is also confirmed when one analyses the EES recommendations received by Germany and the UK between 2000 and 2004. Germany has annually received 5 recommendations between 2000 and 2003 while the UK received 4 in each year. In 2004 a new recommendation format was introduced which allowed a higher number of recommendations. For Germany the number of recommendations jumped to 9 whilst it remained at 4 in the UK. The higher number of recommendations for Germany indicates that the EU saw more areas for improvement in Germany than in the UK and that it exerted a greater pressure for reform on Germany.4 The recommendations to Germany focussed on the reduction of long-term unemployment, the reduction of non-wage labour costs and ‘making work pay’, increasing employment rates, particularly of older workers, establishing a ‘life long learning’ approach and tackling gender gaps. The recommendations to the UK highlighted the lack of a coherent approach for social partner involvement at the national level, high levels of inactivity and persistent pockets of long-term unemployment concentrating on particular groups, gender as well as skill gaps and the low level of basic skills (Council of the European Union 2001a; Council of the European Union 2002; Council of the European Union 2003a; Council of the European Union 2004a). To conclude, in terms of ‘goodness of fit’ between the EES and the national situation, performance in Germany is farther away from the EES targets than in the UK. The EES will therefore potentially exert a greater pressure for adjustment on Germany. However, the ‘goodness of fit’ is not the only aspect that frames national actors’ responses to the EES in

64

Member State Responses

these two countries. The interpretation of the EES and the strategies how it can be used in policy-making processes is also affected by the political system and actor constellations.

Political system and actor constellations The political systems in Germany and the UK differ considerably and one can expect that they make a difference as to how policy actors deal with the EES. Generally, political systems with more veto points and a higher degree of fragmentation offer more opportunities for policy actors other than the government to get access to the OMC processes and also to ‘use’ arguments related to the OMC in public discussions. In other words, the political system affects the power and autonomy of the government and the type of ‘political discourse’ (Schmidt 2000, 2002: 210ff.) which characterizes the communication between the government, the opposition parties, different levels of government, and the electorate/public. Furthermore, actor constellations play a role for the responses to the OMC. By ‘actor constellations’ I basically mean the political party or parties in government, their perception and opinion of the OMC, and their relationship to the opposition parties which is again shaped by the political system. In general one can expect a more intense response to the OMC if the party or parties in government favour the OMC as a governance instrument as well as its policy approach. Comparing Germany and the United Kingdom one recognizes that the power of governments in both countries is very differently shaped by the political system. The government in the UK is in a much stronger position to carry through its preferred policy changes than the German government, because the political system in Germany provides considerably more opportunities for veto-players to intervene, delay and inhibit policy change. For example, the UK normally has one-party governments instead of coalition governments which are the norm in Germany. The most important veto players in Germany are the Bundesländer who can, depending on political majorities, considerably postpone or inhibit policy change through the second legislative chamber, the Bundesrat. The German Länder also have larger authorities in the area of labour market policy than the UK regions and may therefore be more sceptical against an involvement of the EU in social policy. The UK is, despite devolution, still a relatively centralized state and the UK regions are not in the position to be formally involved with policymaking at the national level. Secondly one can compare how the political systems in both countries shape incentives for policy actors to communicate about the OMC in

Institutions and Actors

65

public and to refer to the OMC in order to legitimate policy change. Here the application of Vivian Schmidt’s concept of ‘co-ordinative’ and ‘communicative’ policy discourses proves useful. According to Schmidt, the German system is characterized by a ‘co-ordinative’ discourse and the UK by a ‘communicative’ discourse. In ‘co-ordinative discourses’, arguments and public deliberation play a more important role in policy-making processes than in ‘communicative discourses’, because the political system is more complex and the government is less powerful to impose political decisions. In contrast, ‘communicative’ discourses primarily have the function to present already taken political decisions to the public instead of persuading other political actors on which the government depends in the course of policy-making (Schmidt 2002: 209ff.). In terms of support for the OMC, the German government, which came into power in 1998, was slightly more favourable towards the OMC than the New Labour government in the UK. Although New Labour certainly supported the launch of the EES in 1997, this was part of New Labour’s new strategy of taking a more positive stance towards European integration. New Labour ‘sold’ this new approach to the electorate by claiming that it would take a lead at the EU level in all policy areas, therefore also in the OMC. In Germany, support for the EES went beyond a strategic approach, at least in the beginning of the social-democratic/green government. At that time, the social democratic party’s left supported a more binding EU employment policy and was therefore also very much in favour of the EES. Since then the power-relationships within the social democratic party have changed which was, for example, reflected in Oskar Lafontaine’s resignation as Federal Minister of Finances in 1999. The social democratic/green government has also been replaced by a ‘grand coalition’ in November 2005. Overall the German government has taken on a slightly more distanced position towards the OMC over the years and would not support any more, for example, a binding European employment policy.

Social partners and NGOs The role of social partners and (NGOs) in the political system has an impact on their incentives to ‘use’ the OMC in policy-making processes. For example, if they play an important role in the policy-making process or have their own responsibilities in these policy areas, they will have more incentives to ‘use’ the OMC in the policy-making process than if that were not the case. If they are, for instance, in a strong lobbying position, they may be inclined to refer to the OMC in order to pressure

66

Member State Responses

for policy change. This section briefly demonstrates some differences of the role of social partners and NGOs in Germany and the UK. At the national level, ‘social partners’ play a more important role in Germany than in the UK. In Germany, ‘social partners’ are integrated into policy-making processes in more institutionalized ways and they have a greater authority to reach binding agreements among each other regarding wages and work conditions even when these patterns are regarded as being in decline by some authors (e.g. Hassel 1999; Streeck and Hassel 2004). These conditions are different in the UK. For example, government-social partner relations are less institutionalized; due to the principle of ‘voluntarism’, national ‘social partner’ organizations are in a less powerful position and agreements between ‘social partners’ at the national level play a minor role, and unions are organized in a more competitive way (Edwards et al. 1998; Rose 2001). The status for ‘social partners’ has not considerably changed after ‘New Labour’ has come into power, because the Labour Party has redefined its relationship to the trade unions (change of clause IV of the Labour Party constitution;5 and the credo of ‘fairness but no favours’). ‘Social partnership’ in the UK therefore does not concentrate on the national but on the local and workplace level. These differences suggest that, on the one hand, ‘social partners’ in Germany will have greater incentives to refer to the EES in the course of domestic policy-making than in the UK, because they play a more influential role for policy-making at the national level. They can ‘use’ the EES to strengthen their demands or to criticize the government. The German government might also be more inclined to integrate the ‘social partners’ peak organizations in the NAP preparation processes than the UK government, because such integration is regarded as appropriate. On the other hand, ‘social partners’ in Germany might be more sceptical of too much intervention by the EES since this can be understood as interfering in German ‘social partner’ autonomy. Regarding NGOs, the situation is again different in Germany and the UK. Although there are important social policy NGOs in Germany, these NGOs play a less important role in labour market policies than the ‘social partners’. In labour market policy the social partners are the most important non-governmental actors and due to social partner autonomy, access for NGOs to the political process is more difficult than it is in the UK. Vice versa, since there is no national ‘social partnership’ in place in the UK, NGOs at the local level play a more equal role in labour market policy consultations and implementation compared to the ‘social partners’ in Germany. Therefore, NGOs in the UK may have better chances to be integrated in ‘implementing’ the OMC at the local level than in Germany.

Institutions and Actors

67

NAP production6 The processes of how the NAPs are produced at the national level have an impact on how many and which policy actors other than the government have access to information about the OMC. The production of the National Action Plan of Employment is a legal obligation on the basis of Art. 128, 3 of the Treaty of the European Communities. The EU Commission supports a wide ‘partnership’ approach in producing the National Action Plans and implementing the OMC because nongovernmental policy actors are then believed to be more engaged in its implementation. All in all, however, it is up to the member state governments how they organize the production of the National Action Plans (NAPs). The differences in how these plans are drawn-up in Germany and the UK is discussed here in some detail because the NAP production is the core procedure of ‘implementing’ the OMC. In addition, the character of the production of these plans plays a role for the democratic quality of the OMC process which will be discussed in Chapter 7. The preparation processes of the NAPs employment in Germany and the UK demonstrate both differences and similarities. In both Germany and the UK, the governments and, more precisely, the ministries responsible for labour market policy are the leading actors in the NAP preparation process. They are the main co-ordinators for actor involvement and they also have the authority for finalising the texts. Actor involvement is similar in both countries in the sense that a range of other actors is consulted or asked for input to the NAPs, but the central ministry responsible for drawing up the NAP has the last word before the draft is finalized. Actor involvement differs in the two countries regarding the number of actors involved and the intensity of their involvement. These differences seem to be mainly due to the different political systems and consultation cultures in each country. In comparison, more actors are participating in Germany, and involvement is more intense and conflict-ridden than in the UK. For example, ‘social partners’ are more intensely involved in Germany. They issue annual statements on the NAPs and the EES guidelines, were consulted in the drawing-up process of the NAP, and were eager to have their opinions reflected in the NAPs.7 However, they did not themselves draft any sections of the NAP because they felt that this would reflect an interference of the EU with their collective bargaining autonomy (Tarifautonomie) (Umbach 2004: 66). In contrast, ‘social partners’ in the UK did present their own sections to the NAP from 1999 to 2000 and in 2003. In the UK, the Confederation of British Industry (CBI) and the Trades Union Congress (TUC) are consulted

68

Member State Responses

by the Department of Trade and Industry (DTI) regarding EES issues that are relevant to the ‘social partners’, for example the ‘adaptability’ of the workforce. Overall, social partners in the UK are less involved with the EES than in Germany. Moreover, the drawing-up of the NAPs has not led to a strengthened ‘social partnership’ approach in the UK, and the UK government has publicly opposed an impact of NAP preparation procedures on ‘social partnership’ traditions (The Scottish Parliament and European and External Relations Committee 2003: 69). Due to the federal political system in Germany, involvement of the Länder is more complicated than involvement of the regions in the UK. The Länder have more competencies in EES-related issues than the UK regions and demand, therefore, to be involved to a greater extent. German Länder were more critical than the UK regions of the NAP drawing-up processes as well as of certain aspects of the NAPs’ content. Their criticism was expressed, for example, in the Bundesrat committee statements on the NAP. The German Länder as well as the UK regions delivered their own contributions on their labour market policies to be annexed to the NAPs in 2002 and 2003, but the German federal government drafted the Länder annexes in 2003. Apart from these occasions, the government reported on responsibilities and examples from the Länder and regions but they no longer drafted contributions. In Germany, also the central associations of local authorities were consulted for drawing up the NAPs. Their input was, however, not very intensive. In both countries, the involved actors complained about short time tables and potential work overload in connection to various reporting obligations to Brussels (the work on the NAP employment is only one of several other reporting obligations). Involved actors in both countries perceived the NAP as government-dominated reports on existing policies rather than as forward looking policy plans. This view was also expressed by an interviewee in the UK: ‘We would agree with the DWP-line that ‘National Action Plan’ is a bit of a misnomer and really it is a report on policies, it is not an action plan, it is not saying what we are going to do, its not a plan, it’s a report yet, it’s saying what we do do’ (interviewee). Another reason why the NAP is not accepted as a tool for policy planning is that it is seen as the product of varied authors instead of as a representative consensus of political actors on policies. In both countries, there are no inputs from and no intensive discussions in the parliaments regarding the NAPs. In the UK, the Select Committee on European Scrutiny is informed about the NAP after the completion of this report. The government then reports to the Committees on what is happening in regard to the EES at the EU and national levels. In Germany, the NAP is also delivered to the Bundestag and the Bundesrat after its completion

Institutions and Actors

69

(though the NAP no longer appeared on the Bundestag’s agenda in 2003 and 2004). In the Bundestag no intense discussion and in the Bundesrat relatively little discussion has occurred when committees hand in their annual recommendations for a statement on the NAP. Thus, it can be concluded that the NAPs do not serve as policy planning instruments in Germany and the UK. NAP production does not enjoy high public visibility in either country and it must be assumed that only the actors directly involved in NAP preparation know about these procedures and documents. This is also reflected in a comment from Eironline on the Germany NAP (which certainly also applies to the UK since EU issues score even lower in the UK media than in Germany): As with its predecessors, the 2003 NAP has not received any major public attention or media coverage. There is no debate on the NAP in the press and it is doubtful whether, apart from a few specialists, many people in the wider public even know that it exists. The current public discussion is focused on the government’s labour market policy . . . but the 2003 NAP is not perceived as a major policy paper for the German debate (EIRO 2003). Nevertheless, NAP preparation serves as an instrument for diffusing knowledge about the EES and may partially have contributed to awareness of EES issues among the actors involved. Awareness of the EES beyond these actors involved in NAP preparation is, however, limited. The differences in how the NAPs are drawn-up in Germany and the UK can play a role for a different spread of knowledge and interest in this instrument and therefore for the way in which policy actors respond to the EES.

Relationship to the EU The relationship between a member state and the European Union considerably influences the strategies policy actors pursue in dealing with the OMC. If public opinion is rather negative about European integration policy actors do not have many incentives to legitimize policy changes through the OMC. Vice versa, if a country receives a considerable sum from the structural funds or if the EU plays or played an important role for economic or political development in a country, the government in particular will strategically try to ‘please’ the EU and to report a successful implementation of EU policies. The relationship to the EU differs considerably in Germany and the UK. In general, public opinion in Germany is much more positive and open to the EU than in the UK. Germany is one of the EEC’s founding member

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states and the majority of political elites as well as public opinion support European integration (European Commission 2006b: 27). In Germany, EU integration has been approved as a project seeking to secure peace in Europe after the disasters of the Second World War and of re-integrating Germany into the network of Western European democracies and economies. In contrast, the UK has, for a long time, been regarded as an ‘awkward partner’ (George 1991) in the EU. The process of the UK accessing the EU was long and difficult.8 In both main parties, the Conservative and Labour Party, influential wings opposed European integration: the paternalistic wing of the conservatives, since they opposed internationalization per se from a nationalistic point of view, and the farther left wing of the Labour Party, since it regarded the EU as merely a capitalistic club. Although the Labour Party has developed a more positive view of the EU since the late 1980s and has adopted the position that the UK should take on a leading role at the EU level (Labour Party 1997; Allen 2005) the UK electorate is still more sceptical of EU membership than electorates in other member states (European Commission 2006b: 27). There are also slight differences in terms of EU funding received in both countries. Both Germany and the UK are net-contributors to the EU, in 2004 Germany net-contributed more to the EU than the UK. However, in absolute terms, Germany received a higher amount of structural fund moneys and particularly the East German Länder profited from structural fund programmes. According to interviews with politicians who implement the structural funds at the regional level in both countries, German actors emphasized more strongly the importance of receipts from the structural funds than their UK colleagues. The different relevance of the structural funds for labour market policy could have an impact on policy actors’ strategies to ‘use’ the EES in policy-making in order to create a closer link between the European Social Fund and the EES. Since implementation structures of the European funds are highly complex this aspect is not extensively covered in the empirical study presented in the next chapter. In conclusion, the sceptical stance towards European integration and an arguably slightly minor role of structural fund moneys for regional labour market policies in the UK possibly limit incentives for British policymakers to refer to the OMC in order to legitimize domestic policy change. In contrast, public opinion regarding European integration and the role of the structural funds are at least no obstacle for policy actors to ‘use’ the EES in policy-making processes according to their interests in Germany. In summary, this background analysis indicates that, overall, the background conditions in Germany provide more incentives for policy actors

Institutions and Actors Table 4.3

71

Contextual factors in Germany and the United Kingdom

Factors ‘Goodness of fit’ Pressure for adaptation due to labour market situation

Germany

UK

⫹

⫺

Pressure for implementation due to fit OMC – domestic policy approach

⫹

⫺

Capacity for implementation due to fit OMC – domestic policy approach

⫺

⫹

Political system and actor constellation Incentives for policy actors to refer to/communicate about OMC due to veto-points and fragmentation

⫹

⫺

Supportiveness of the government to EES

⫹

⫹

Involvement of actors other than central government in NAP production Relationship to the EU Public opinion to EU

⫹

⫺

⫹

⫺

Incentive through receipt of ESF and structural fund money

⫹

(⫹)

Role of EU for political and economic development

⫹

0

Source: author.

to ‘use’ the EES in policy-making processes than in the UK. The ‘fit’ between labour market performance and existing policy approaches on the one hand and the EES on the other hand was already better in the UK than in Germany when the EES was launched. According to Europeanization theory this means that Germany is under greater pressure to introduce reforms. However, as the EES is not legally binding, the greater ‘misfit’ of policy approaches to the EES in Germany could also impose greater difficulties to move closer to the EES than in the UK. In addition, the structure of the political system with less powerful veto players and a more Euro-sceptic public in the UK provides fewer incentives for policy actors in the UK to refer to the OMC in order to legitimize policy change. The role of the different aspects discussed in this chapter is summarized in Table 4.3. Here it becomes obvious that the individual aspects often do provide conflicting incentives for policy actors. The next chapter examines how policy actors in Germany and the UK responded to and ‘used’ the EES in policy-making processes. It also further investigates some of the contextual factors introduced in this chapter in explaining the different responses.

5 The European Employment Strategy in Germany and the United Kingdom

This chapter compares how policy actors in Germany and the UK dealt with the EES between 1997 and 2005/06. The first section analyses the labour market policy development in Germany and the UK since the mid-1990s. It focuses on the question of which policy areas have moved closer to the EES and which have not. The second section investigates how policy actors, for example, the government, opposition parties, ‘social partners’ and regions responded to the EES and how they ‘used’ it in policy-making processes. This section also contains an examination of the EES’ presence in the media. The final part discusses which type of response to the EES – motivator, catalyst, denial and refusal, uploading (see Chapter 2) – is dominant in which country and how this response can be explained through considering it in relation to the context factors described in the previous chapter.

Labour market policy development in Germany and the UK A comparison of labour market policy developments in Germany and the UK shows considerable differences. Before the EES was introduced, policy approaches in the UK were already very similar to many aspects of this strategy. In Germany a ‘paradigm change’ in labour market policy took place some years after the introduction of the EES with the new ‘Hartz reform’ integrating former social assistance into the unemployment benefit regime. This section first analyses the labour market policy developments in Germany and subsequently of the UK. Germany Examining the changes in labour market policy in Germany between 1997 and 2005 one can argue that a ‘double change’ has taken place 72

The EES in Germany and the UK

73

(Blancke and Schmid 2003). The first change is related to the replacement of the Christian-democratic/liberal government coalition by the social-democratic/green government in October 1998 which occurred about one year after the EES was introduced. The second change is linked to a transformation of the labour market policy approach within the new social- democratic/green party government. During the first months of being in office, the new social democratic-led government implemented several ‘promises’ they had made to the electorate in the election campaign. These changes revoked some regulations introduced by the previous Christian-democratic/liberal government and were presented as a move towards a ‘traditional social democratic’ labour market policy. On the one hand, the ‘traditional social democratic’ labour market policy approach sought to preserve employees’ occupational or social status in cases of sickness, unemployment, or old age through ‘passive’ benefits. On the other hand, the ‘traditional’ social democratic labour market policy approach combines ‘passive’ benefits with ‘active’ labour market policy characterized by an active involvement by the state to steer structural economic change and to support employees’ ability to adjust to these structural changes, for example through training. ‘Active’ labour market policy can also mean that the state actively engages in job creation by subsidising employment or extending public employment. Several examples illustrate this change towards a ‘traditional social democratic’ labour market policy during the first months of the new government in office. First, the new government revoked cuts in sick payments and the restriction of dismissal protections immediately after it had entered office.1 Furthermore it started – accompanied by a broad media campaign – initiatives such as the constitution of the Alliance for Employment, Vocational Training and Competitiveness comprising representatives from the government and the peak employer and employee organizations; the ‘Immediate Programme to fight Youth Unemployment’ that aimed to bring 100,000 persons under 25 years of age into vocational training measures or regular jobs in 1999; and the adoption of a labour market reform act2 that widened access to measures of active labour market policy and focussed on the prevention of long-term unemployment. All these measures were presented in the German National Action Plan on employment (NAP) as an implementation of EES objectives (Federal Republic of Germany 1998). This demonstrates that the EES objectives were initially interpreted by the social- democratic/green party government as adhering to the principles of ‘active’ labour market policies. We will see that this interpretation changed during the course of labour market development in Germany.

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Member State Responses

Already in 1999 the social democratic party experienced internal changes. Due to conflicts between different wings within the party, Oskar Lafontaine who advocated Keynesian-oriented employment and economic policy for the national as well as for the European level, resigned from his posts as Federal Minister of Finances and chair of the social democratic party in March 1999. He was succeeded by Hans Eichel as Federal Minister of Finances who was in favour of a stricter budget policy. Chancellor Gerhard Schröder took over the chair of the social democratic party. At this time numerous struggles were being waged by different factions within the social democratic party. The ‘traditionalists’ in the social democratic party defended the approach of active labour market policy and a strong role of the state in job creation and anti-cyclical economic steering. In contrast, the ‘modernists’ promoted a ‘third way’inspired approach of labour market ‘activation’. As illustrated in Chapter 3, the ‘activation’ paradigm conceptualizes unemployment as caused by ‘disincentives’ in the social security system, that is by ‘too generous’ ‘passive’ benefits. ‘Activating’ labour market policy, therefore, focuses on increasing the incentives for unemployed persons to take up work through ‘making work pay’, but also through intensive counselling by job agencies and training measures so that potential employees can meet employers’ needs. The struggle between different labour market policy approaches can be illustrated by discussing the Blair-Schröder paper in 1999. This paper promoted all the important elements of the ‘third way’ labour market policy agenda such as supply-side orientation, removing ‘disincentives’ to take up work anchored in the social security system, and the rebalance of rights and obligations (Blair and Schröder 2003 [1999]). With this paper, the ‘modernists’ in the social democratic party prominently advocated a change towards an ‘activation policy’ which was, however, widely criticized by the left wing of the social democratic party as well as other groups in the wider public discussion. During this period of internal struggles about labour market policy paradigms, some small scale policy experiments, already in line with an ‘activation’ approach, were introduced. For example, pilot projects to subsidize low wage jobs started in 2000 as it had been favoured by the so-called benchmarking group in the Alliance for Employment, Vocational Training, and Competitiveness; the integration of unemployment and social assistance was probed in regional projects since April 2001; and a further labour market policy reform act abolished the access to unemployment assistance for those who had not previously qualified for unemployment benefits.3 The pace of labour market policy change considerably accelerated during 2001 when the next federal elections were already approaching and the likelihood of fulfilling chancellor Schröder’s promise to bring down

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75

unemployment to 3.5 million people (from 4.4 million in 1998) was waning. During the second half of 2001, negotiations over the Job AQTIV Act took place – AQTIV stands for ‘activating, qualifying, training, investing and placing’. In the draft law it was stated that the Job AQTIV Act should introduce a shift away from a passive labour market policy towards a preventative and activating approach. It emphasized that a new balance of rights and responsibilities was to be established. The draft law of this act also contains many references to the EES stating that this act will bring German labour market policy closer to the EES’s objectives (Deutscher Bundestag 2001b: 1, 24, 26, 39). It focussed on improvements of placement service processes and further extended the access to active labour market policy measures. On the other hand, sanctions to jobseekers, not complying with the rules and the offers of the employment service, were increased. This direction of change was strongly reinforced through what happened in early 2002. On the 5th February 2002, the Federal Audit Court (Bundesrechnungshof) reported that the Federal Employment Agency had published misleading placement statistics suggesting a far better placement performance than was actually accomplished. This ‘placement scandal’ featured very highly in the media and led to busy activism by the government. After the chair of the Federal Employment Agency, Bernhard Jagoda was replaced by Florian Gerster, who was known as supporting the ‘modernists’ in the government, a two-step plan to reorganize the Federal Employment Agency was adopted in the parliament and came into force in March 2002. Subsequently, the so-called Hartz-Commission was established with the mandate to develop a far-reaching plan for labour market policy reorganization in Germany.4 The Hartz-Commission presented its results in August 2002 that comprised, most importantly, the following areas: new obligations for jobseekers, regulations on sanctions; cuts of benefits; changes of eligibility and needs tests; integration of unemployment assistance and social assistance; reforms of placement activities; reorganization of the Federal Employment Agency; regulations on low-wage jobs; measures related to training; measures concerning older workers; and the overall simplification of measures (Hartz-Kommission 2002). The HartzCommission report contains a whole chapter on European employment policy and states that its proposals serve to implement the EES: In its report, the Commission “Modern Labour Market Services” has developed proposals which relate to the context of chosen EUguidelines and are suitable to enter the following report by the federal government in terms of a quick and efficient operationalization (Hartz-Kommission 2002: 343, translated, M.B.).

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The Hartz Commission report was the basis for the subsequent labour market policy reforms after the social-democratic/green coalition government had been newly elected in September 2002. These reforms were enacted by the four so-called ‘Hartz Acts’ or ‘Acts for Modernising Services in the Labour Market’ which were adopted in a one-year period, finalized in December 2003. The reforms that are based on these acts are regarded – even by some commentators of the centre-right press – as the most significant cuts in labour market and social policy in Germany since the Second World War (Soldt 2004). All in all, these changes can be and have been interpreted as the manifestation of a shift from ‘active’ towards ‘activating’ labour market policies because they are based on concepts of social justice, the state, and relations between state, market, society and the individual which depart from ‘traditional’ social democratic thinking as well as being distinct from pure neo-liberal concepts. The integration of unemployment and social assistance can be regarded as the most obvious sign for such a paradigm shift. Therefore, major labour market policy changes have taken place in Germany after the EES had been introduced in 1997. These changes were coherent with the approach of the EES and closed the initial ‘misfit’ to some degree. The United Kingdom The situation in the United Kingdom was quite different in comparison to Germany. When the EES was adopted in November 1997, the New Labour government was already in place and had already announced changes in labour market policy towards more ‘activation’ and life long learning. Most of New Labour’s plans were introduced during Blair’s first term in power. Afterwards only smaller reforms of these programmes were – and are still – undertaken. The most important point for the analysis of this book is that policy concepts orientated at a ‘third way’ and ‘activation’ agenda were already explicitly discussed and partially even introduced in the UK before the EES had been adopted. It has already been demonstrated in the literature that labour market policy in the UK has increasingly emphasized a ‘welfare-to-work’ approach since the late 1980s. The Thatcher administration introduced, for example, the ‘Restart’ interviews in 1986. Unemployed persons had to attend these interviews as a condition for benefit receipt after having been unemployed for twelve months. Since then, the work-search requirements have been further tightened gradually. Starting in October 1986, benefit recipients had to have their first Restart interview after six months of unemployment, and the interview had to be repeated every six months.

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The government introduced the Employment and Training Programme in 1988, which linked the receipt of unemployment benefits for young people with training. From 1991 on, very long-term unemployed people had to attend mandatory job courses, and in 1994 the sanctions for jobseekers in cases of non-compliance were doubled in connection to a strategy called the ‘stricter benefit regime’ (King 1992; Powell 1992; Trickey and Walker 2000; Clasen 2002; Finn 2003: 711; Van Reenen 2003: 6). The next important step toward strengthening the ‘welfare-to-work’ approach in the UK was the introduction of the Jobseeker’s Allowance (JSA) by the conservative government in 1996. The JSA regime is still in place and has not been abolished by New Labour. The JSA was ‘intended to increase the emphasis on benefit receipt from a passive consequence of unemployment to a more active effort to find work’ and was designed to ‘encourage long-term claimants back into work and to ensure that the risk of short-term claimants becoming long-term claimants is reduced’ (Bottomley et al. 1997: 1). JSA integrated two previously separated systems: contribution-based unemployment benefit was replaced by contributionbased JSA, and means-tested Income Support was replaced by incomebased JSA. Contribution-based JSA claimants must meet the conditions for national insurance contributions5 as well as new, additional obligations. Now claimants for both benefits also have to sign a ‘Jobseeker’s Agreement’ as a condition for benefit receipt. This agreement, which is compulsory and prescribes the steps that an individual must take to find employment, replaces the previous ‘Back-to-Work-Plan’, which was only a voluntary, advisory document. Whether the jobseeker complies with these steps is monitored by employment service staff. The possibility of the employment service issuing a Jobseeker’s Direction with concrete requirements for job search has been introduced by the JSA. Before the introduction of JSA, unemployment benefits were available for up to twelve months, while contribution-based JSA is now only paid for up to six months. Afterwards, the claimant may be eligible for income-based JSA. Another work incentive is the ‘Back to Work Bonus’ available after three months of unemployment.6 The conditions for the receipt of benefits have been made even stricter through newly sharpened sanctions; if a claimant is not available for work, fails to actively seek employment, fails to sign a Jobseeker’s Agreement, or does not attend an employment service interview, benefit payments are stopped until the claimant again fulfils these conditions. If someone leaves a job voluntarily or refuses a job offer without good cause, sanctions lasting for up to six months can be imposed. Shorter sanctions may

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be imposed on those who fail to attend mandatory courses such as Jobplan Workshops or prescribed training courses, or who do not follow their Jobseeker’s Directions. These disqualifications last two weeks and can be increased to up to four weeks if the infractions are repeated within twelve months (Bottomley, et al. 1997: 4). When the JSA came into effect in 1996, the disqualification period for the receipt of benefits for those who had left their jobs voluntarily was extended from six weeks to 13 weeks. All these changes are already coherent with an ‘activation approach and predate the EES’ introduction. The New Deal (ND) programmes, that are a very important component of New Labour’s ‘third way’ and ‘activation’ agenda, were prominently announced in New Labour’s 1997 Election Manifesto as well as in New Labours’ first budget in July 1997.7 This means that concrete plans for the ND programmes the launch of the EES. The ND programmes now apply to a range of different groups and display different features. Some of the ND programmes – the ND for Young Persons, the ND for Long-Term Unemployed, and partially the ND for Partners – are compulsory while those for Lone Parents, Older Workers, Disabled Persons, Musicians (England), Creative Artists (Scotland), and the Self-Employed are voluntary. The ND programmes offer intensified job counselling, training for job search, and, depending on the target group, other assistance in gaining a job. The NDs that are compulsory oblige benefit recipients to take part in a ‘gateway’ period – after six months for persons under 25 years of age and after 12, 18, or 24 months for long-term unemployed people, depending on the region and the target group. Earlier access to the ND for young and longterm unemployed people is possible if they belong to particularly ‘needy’ groups, but eligibility depends on the discretion of the responsible civil servant in local jobcentres. In 2004 the so-called ‘Working Neighbourhood Pilots’ have been introduced which offer voluntary access to the New Deal Programmes after only 3 months of unemployment in 12 pilot areas across the UK where unemployment is particularly high (Clasen 2005: 200). Participation in the gateway phase of the New Deal Programmes is the condition for benefit receipt. The ‘gateway’ period consists of compulsory interviews, job search training, and several ‘options’, for example, taking up a full-time subsidized job, full-time training towards an accredited qualification (only for young people), subsidized self-employment, work in the voluntary sector or in the environmental task force (only for young people). Related to these reforms was also the creation of a single-access point for a range of social benefits. This started with the introduction of the Single Work-Focused Gateway pilots in 1999. In 2001, the employment service merged with the Benefit Agency into the ‘Working Age Agency’.

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Later, the term ‘Jobcentre Plus’ was used to describe both the national agency and the individual local offices used by job seekers. In April 2002, Jobcentre Plus was introduced nationwide as the single access point for all benefit claimants.8 Each new benefit claimant is tested by Jobcentre Plus staff for willingness and ability to work.9 Further aspects of New Labour’s ‘activation’ strategy are measures to make work pay. These comprise the introduction of Tax Credits and a universal minimum wage. Various tax credits were adopted in 1999 and later integrated into the Working Tax Credit in 2003 and a Child Tax Credit for persons with or without a job. The tax credits are means-tested and aim to top-up low wages to make jobs in this sector more attractive. The National Minimum Wage complements the tax credits. It was also introduced in 1999 and guarantees certain minimum wages per hour for different groups. The Low Pay Commission regularly recommends the height of the National Minimum Wage. The next adjustment will be taken in October 2006.10 Further changes are in the planning stage regarding incapacity benefit and the severe disability allowance. They aim to limit access to these benefits and to integrate more of the current incapacity benefit recipients into work (Department for Work and Pensions 2006). Overall, the EES was shaped by British and Scandinavian labour market policy approaches (Ferrera and Sacchi 2005: 142; Jacobsson 2005: 107; Lindsay and Mailand 2004) and therefore there was already a close ‘fit’ between the EES and the British policy approach in the late 1990s. However, the UK received some EES recommendations to change certain aspects of its labour market policy approach. These recommendations focused, for example, on the ‘social partnership’ approach, early access to active labour market policy measures and the reduction of inactivity figures. The following section examines how policy actors in Germany and the UK dealt with the various recommendations and ‘misfits’ to the EES.

Responses to the EES Government and opposition responses to the EES While governments in both countries which have been in power between the launch of the EES in November 1997 and the time of writing, September 2006, supported the EES in general, one can also observe significant differences in how governments responded to and ‘used’ the EES in policy-making processes at the national level. In Germany, although the conservative-liberal coalition government was more sceptical regarding European social policy than members of the Social Democratic Party it participated in the first EES round and delivered

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a National Action Plan in 1998. This plan focussed on a supply-side approach and emphasized that the main responsibility for labour market policy remains with the member states. During this first year of the EES, the social democratic and the green party in opposition strongly supported the EES and criticized the reluctant position of the conservative– liberal government towards this strategy. When these parties entered government in 1998, they mentioned the EES in their coalition treaty and even supported compulsory objectives in the EES: The employment guidelines should also contain binding and reviewable objectives, particularly to fight youth and long-term unemployment as well as to overcome the discrimination of women on the labour market (SPD/Bündnis 90/Die Grünen 1998b: 41, translated M.B.). Overall, political actors in Germany referred more extensively to the EES than in the UK. It is an important observation that the EES was used by actors from different political colours to back up policy change and to criticize actors from different political factions. This demonstrates that the EES framework is broad enough to be interpreted and ‘used’ in various ways, it does not favour political actors with particular convictions. For example, some Länder governments led by the Christian democrats referred to the EES in the Bundesrat as well as Christian democratic politicians in the Bundestag to criticize the federal social-democratic/ green government (Deutscher Bundestag 2000c: 9112; Bundesrat 2001a). Similar strategies were also used by politicians from the socialist party in the Bundestag (Deutscher Bundestag 2000c: 1902f.; Deutscher Bundestag 2000b). This demonstrates that the EES provides a relatively open framework that can be interpreted according to the goals of various political positions which are in relative proximity to the political centre. As demonstrated in the previous section, the EES was referenced in almost every important labour market policy draft law including the Second Reform Act of Social Security Code III, in the Job-AQTIV Act, and in the Hartz-Acts.11 The EES was also referenced in many discussion papers and documents related to labour market policy-making such as in the report of the project group ‘future of work’ of the social democratic party’s executive board (SPD Parteivorstand 2001), in a paper on labour market policy development by the benchmarking group of the Alliance for Employment, Vocational Training and Competitiveness (Bündnis für Arbeit 2000; Bündnis für Arbeit 2001), in the report of the Hartz-Commission (HartzKommission 2002) and a strategy paper of the green party on ‘flexicurity’ (Grünen 2001). In the beginning of the social-democratic/green party

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government in office, the EES was interpreted from a more ‘traditional social democratic’ perspective. For example, references to the EES were made in order to promote an approach to ‘prevent long-term unemployment’ by widening access to measures of active labour market policy. Later, references to the EES rather emphasized the ‘activation’ and ‘employability’ aspects of the EES. In the Hartz IV act, for example, the new means-tested benefit for all those seeking work is presented as the government’s strategy to achieve, according to the EES guidelines, full employment in Germany (Deutscher Bundestag 2003b: 44). All in all, there are two main areas where the EES was used to back up policy change by the government: the ‘prevention’ of long-term unemployment and unemployment more generally and, secondly, the integration of older workers into the labour market. In this area, Germany had received several recommendations by the EU Council (Council of the European Union 2001a; Council of the European Union 2002; Council of the European Union 2004a). The government’s reaction to the first EU recommendation on restricting early retirement was rather hesitant and reflected an unresolved conflict between demands for integrating both older and younger workers into the labour market. It was even expressed that more emphasis should be put on policies for younger persons: It becomes obvious that the task of securing the integration of youths into the labour market while simultaneously prolonging the time older workers remain employed, will dominate the social and labour market policies for years to come (Federal Republic of Germany 2000: 46, translated M.B.). In 2001, however, the position of the government changed and the Alliance for Employment, Vocational Training and Competitiveness announced a ‘paradigm change’ towards the inclusion of older people into the labour market (Alliance for Labour 2001). Many measures were introduced hereafter, for example the reduction of waiting-times for integration subsidies for older unemployed people from twelve to six months and the reduction of the age limits for integration subsidies from 55 to 50 (Deutscher Bundestag 1999a; Deutscher Bundestag 2001b). The possibilities to employ older workers on part and fixed term and low wage contracts were expanded through various acts. The Hartz Acts I and II explicitly mention that these changes are in line with the EES (Deutscher Bundestag 2002a: 34, 40; Deutscher Bundestag 2002b: 21). Also recently the Federal Employment Agency issued an ‘action day for older workers’ with which it presents ‘good practices’ in integrating older workers into

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the labour market. The press release announcing this action day refers explicitly to the EES and mentions that the target of an employment rate of 50 per cent for older workers is far from being achieved (Bundesagentur für Arbeit 2006). Interviewees gave ambiguous answers when asked whether the EES had influenced labour market policies in Germany. Most interviewees claimed that the EES has contributed to a more intensive reflection of current labour market policy approaches. However, many interviewees stated that the EES was not the most important reason for policy change but that it underpinned changes that were ‘in the pipeline’ or supported by the government anyway. The EES was used by the government to back up unpopular changes, for example to put more pressure on unemployed people to take up a job, also on the elderly. This function of the EES is explicitly identified in a statement by the faction of the social democratic and the green party in the Bundestag: ‘The benchmarking process that is related to the Open Method of Coordination can be advantageous for implementing reforms since it can increase the reform pressure on national governments’ (Deutscher Bundestag 2005: 6, translated M.B.). *** In the UK, the responses to the EES differ in some respects to those in Germany, but not in all aspects. The UK government preferred to present itself as effectively defining the EU agenda when it referred to the EES at home, for example in reports about the EES to the parliament. When mentioning the EES, the UK government made it clear that it was actively shaping the EES agenda and that, therefore, the EES is a worthwhile undertaking for the UK. The following quote demonstrates how Employment Minister Andrew Smith emphasized the influential role of the UK government on the EES agenda: The employment guidelines to which I referred earlier explicitly include – at the behest of the United Kingdom – the requirement that every regulation be examined to gauge its effect on employment levels. Moreover, we will promote adaptability, flexibility, equal opportunities and entrepreneurship in employment policy (House of Commons 1999a: Column 472). Overall, the UK government referred much more seldom to the EES than the German government in policy planning papers. Only one White Paper

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on skills (DfES 2003) refers to the EES by stating that the skills strategy is part of a wider framework agreed at the EU level. In fact, the area of skills and training is the only area where the government explicitly refers to the EES as a strategy for backing up policies. This is an interesting example and it can be used to explore whether a reference to the EES indicates that the EES has influenced this particular policy. Some caution against such an assumption is appropriate. For New Labour, policy improvements in the areas of education and vocational training have been very high on its agenda long before the EES was launched. Already Labour’s Election Manifesto in 1992 included statements that it aimed to improve training provisions in order to strengthen the UK’s competitiveness. The 1997 Election Manifesto even promised that education would become the ‘number one priority’ (Labour Party 1997). It is therefore more likely that the EES is mentioned in this area in order to provide additional support for policy changes that are planned anyway and not because the EES changed policy reforms. Another difference to the German case is that the UK government openly refused some recommendations of the EU to the UK and explicitly opposes to follow them. This happened particularly in the area of early access to measures of active labour market policy and in the area of ‘social partnerships’ at the national level. Regarding the former, the EU Commission urged the UK in its recommendations in 2001 and 2002 to reinforce active labour market policies for the adult unemployed before the 12 months point, so as to increase the number of people benefiting from active measures, and supplement the support provided by the Jobseekers’ Allowance Regime (Council of the European Union 2001a: 37). In its National Action Plan, the UK government however argued that ‘large-scale programmes for the adult unemployed before 12 months would not be appropriate in the UK . . . since most unemployed leave JSA before 12 months’ (United Kingdom 2001: 8f.). The government also argued that job search measures are much more efficient than ‘largescale’ public programmes’. While the government reduced waiting times for the New Deal for the Long-Term Unemployed in several steps and introduced early access pilots in 2004, initially it refused to follow the EES approach. Also in the field of social partner and government relationships, the EU issued recommendations in 2002 and 2003 that the UK should strengthen ‘social partnership’ at the national level (Council of the

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European Union 2002) or ‘at all levels’ (Council of the European Union 2003a). In the UK NAPs, the government responded reluctantly to these EU Council recommendations, arguing that tripartism at the national level contradicts UK tradition (United Kingdom 2001: 25; United Kingdom 2002: 6; DWP 2003: 16). In an inquiry of a Scottish Parliament committee about the EES, a central government official criticised that the EES should not be a tool to ‘rip up and reform national traditions, cultures, structures and institutions’ (The Scottish Parliament and European and External Relations Committee 2003: 69). Such open refusals of taking EES recommendations into account did not occur in Germany. There are further differences in responses of political actors if we examine the opposition parties. In the UK, the opposition parties did not use references to the EES to criticize the government’s policy agenda or policies. This was different in Germany. Particularly when the Christian Democrats represented a majority of Länder governments in the Bundesrat, statements issued by Bundesrat committees often criticized the socialdemocratic/green party government that it did not undertake sufficient efforts to achieve the objectives of the EES and of the Lisbon agenda more generally (e.g. Bundesrat 2001a). Also the Christian Democratic and Liberal Party faction in the Bundestag submitted statements to the plenary in which criticism that the government’s policies do not go far enough to flexibilize and deregulate the labour market was backed up by references to the EES (Deutscher Bundestag 2000a: 9107f.). Even the socialist party referred to the EES in order to demand policy changes by emphasising very different aspects of the EES as the Christian Democrats (for example an ‘active welfare state’, part-time models) (Deutscher Bundestag 2000c: 1902f.; Deutscher Bundestag 2000b). To summarize, references to the EES were used by the Germany government to justify various labour market policy changes. In addition, opposition parties with different political agendas used the EES in order to criticize the government and to support their own political demands. EES recommendations were not openly refused by the German government. Policy actors in the UK used the EES in other ways. The government very rarely referred to it to legitimize policy change and it was not used by opposition parties to exert any pressure on the government. Rather, the UK government stressed that it had ‘uploaded’ its own labour market policy approach to the EU and in some occasions it even openly refused to acknowledge any impact by the EES in the UK. In both countries, however, interviewees stated that the EES played a role in policy planning but that it was never the main reason for policy change. Rather it served as an additional ‘inspiration’ in the policy-making process.

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Responses in the Länder and regions The Länder and regions’ opinions about the EES and their ways of using it in the policy-making process differ between Germany and the UK. The German Länder are more sceptical of European employment policy coordination than the UK regions because the Länder fear interference and weakening of their policy competencies (cf. Bundesrat 1999b: 1). Some of the German Länder are, however, more supportive of the EES, partially dependant on the parties to which their governments belong, the Land’s engagement in labour market policy and the role of the European Social Fund (ESF) for this Land. If Länder labour market policy is supported to a substantial degree by the ESF, this is an incentive to orient or even align their policies with the EES-related ESF criteria. Regions in the UK are more relaxed about the EES, in the sense that they have less to gain and less to loose through it since they do not have specific competencies for labour market policy. There are also differences as to how German Länder and UK regions refer to the EES. The NAP was frequently discussed in the German Bundesrat until 2002.12 Representatives of those Länder governed by parties in opposition at the federal level often capitalized on these debates to criticize the federal government. For example, some Länder in which the Christian Democratic Union (CDU) or the Christian Social Union (CSU) participate in government criticized the Job AQTIV Act and the ‘Hartz’ Acts as not far-reaching enough in a statement on the NAP (Bundesrat 2003b: 7) when the social democratic green federal government was in place. The Bundesrat committee statements on the NAPs are also used to issue opinions on the federal government’s labour market policy. When the parties who are in opposition at the federal level have the majority in the Bundesrat, the statements on the NAP by the Bundesrat committees contain critical comments on individual labour market policy issues, for example criticising early retirement policies, demanding a stronger ‘activation’ approach and an expansion of the low wage sector (e.g. Bundesrat 2002a: 3f.). Several Länder referred to the EES in documents on their Länder labour market policy. Brandenburg, for example, published a document outlining the connection between the EES, ESF and Brandenburg’s labour market policy of Brandenburg and demanded an even closer link between them (Ministerium für Arbeit 2004: 7). Christian democratic as well as social democratic governed Länder even occasionally referred to the EES in federal draft laws prepared by them or in motions to change a federal draft law.13 This again demonstrates that the EES can be interpreted by parties of different colours for their different purposes.

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In the UK, the regions have no role in central policy-making and are integrated in a more informal way during the drawing-up processes of the NAPs. For these reasons, they did not issue separate statements on EES aspects.14 Documents of the devolved administrations refer to the OMC inclusion rather than to the EES because they have more competencies in this area.15 This remains in contrast to the Bundesrat who issues annual statements on the NAPs as a collective actor of the German Länder. These differences are mainly due to the differences in political systems of Germany and the UK, reflected in the much stronger role of the Länder in policy-making processes at the federal level and wider competencies of the Länder in labour market policies than it is the case with UK regions. Responses from unions and employers ‘Social partners’ in Germany and the UK dealt differently with the EES. Social partners in Germany referred more often to the EES than those in the UK and used it to support their own arguments and interests in public debates. The German Federation of Trade Unions and the Confederation of German Employers’ Associations issue annual statements on the EES.16 The German Chamber of Industry and Commerce also publishes statements in some years.17 The British social partners do not issue regular opinions on the EES. In some years, the British social partners have however drafted parts of the National Action Plans by themselves which did not occur in Germany.18 Both, the German Federation of Trade Unions and the Trades Union Congress in general supported the EES because they hoped it could support workers rights and the quality of jobs. The German Federation of Trade Unions and the Trades Union Congress referred differently to the EES in official documents. While the German Federation of Trade Unions often mentioned the EES in press releases and some other documents in which it presents its position to the EES to demand certain policy changes from the government,19 the Trades Union Congress did not refer to the EES in any press release or document. Both also do not refer to the EES in consultation documents related to domestic policy making processes. One reason as to why the Trades Union Congress did not use the EES in the policy-making process is that the Trades Union Congress plays a less important role in national policy-making compared to the German Federation of Trade Unions. In addition, the Trades Union Congress will anticipate that the UK government would not accept being set under pressure to introduce reforms on the grounds of the EES. Therefore referring to the EES would not help the Trades Union Congress to strengthen their position.

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Whilst analysing the German Federation of Trade Unions’ position towards the EES an interesting change can be observed. When the Christian-democratic/liberal party government was still in place, the German Federation of Trade Unions referred very positively to the EES to back up its positions on active labour market policy (DGB 1997; DGB 1998a). Later, the German Federation of Trade Unions became more and more critical about the supply-side orientation of the EES and commented that this had to be combined with a demand-side approach if unemployment should be reduced (DGB 2003a). When the EES increasingly included recommendations on wage policy, the German Federation of Trade Unions also emphasized that wage policy was still the domain of the ‘social partners’ and that European recommendations could not be treated as binding in this field (DGB 2003a). If we look at the employer and business organizations in Germany and the UK, differences between both countries, but also differences to the trade unions in both countries become obvious. First of all, the employer and business organizations had a rather sceptical position regarding the EES in the beginning but have become increasingly supportive of the EES in recent years. When the EES was launched, employer and business organizations in both countries were afraid that the EU could impose new regulations on them and that this method could develop into a stronger EU level intervention into European labour markets. However, the Confederation of German Employers’ Associations, the German Chamber of Industry and Commerce and the Confederation of British Industry increasingly publish supporting press releases and documents about the EES praising its benchmarking features and resources for ‘policy learning’.20 Employer organizations in both countries are also supportive regarding the content of many EES guidelines and recommendations, and both stress the points which they favour, such as the flexibility, deregulation or ‘removing red tape’ agenda, ‘employability’ and ‘activation’, life long learning, entrepreneurship, and so on. At the same time, they disregard those EES aspects that do not fit with their agenda and that are supported by the trade unions. Differences primarily existed in how employer and business organizations in Germany and the UK referred to the EES. The Confederation of German Employers’ Associations and German Chamber of Industry and Commerce referred more extensively to the EES than the Confederation of British Industry. They even backed up their position in consultation documents related to the law-making process.21 The Confederation of British Industry does not so much refer to the EES in order to strengthen its own arguments in the policy-making process but in order to disseminate its own interpretation of the concepts used in EES guidelines (CBI 1999: 3).

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To summarize, social partners in Germany used the EES more extensively to strengthen their position in the policy-making process than in the UK. The German Federation of Trade Unions was initially very positive regarding the EES while it turned more critical over the years. In contrast, employer organizations in both countries increasingly support the EES and stress aspects which fit their policy agendas such as labour market flexibility. The EES in parliaments and media The visibility of the EES in the public is an essential precondition if the EES should work as a ‘naming and shaming’ instrument. In addition it is important to examine whether and how parliaments dealt with the EES because this shows which role the EES played for policy development. In both countries, the EES does not play an important role in parliamentary discussions. However, both parliaments are regularly informed about the EES. In the first years after the EES’s introduction, the EES and the NAPs were sometimes mentioned in parliamentary discussions about ongoing labour market policy reforms in Germany.22 The NAPs were, however, never discussed in any detail. Both parliaments were not involved in drafting the NAPs. As demonstrated above, the EES was mentioned in several draft laws and statements on draft laws by Bundestag and Bundesrat committees in Germany whereas references to the EES in the British law-making process are virtually non-existent. The Bundesrat discussed the EES more extensively. The Christian-democratic-led Länder governments, for example, were concerned about the share of competencies between the EU, the national, and the Länder level. They demanded that the competencies of each level be clarified and that the main responsibilities of the national government be respected in the area of labour market policy (e.g. Bundesrat 2000a: 3f.). Overall, the EES was not very visible in parliamentary discussions in both countries and not used as a tool for policy-making. Research on media coverage of the EES (Umbach 2004: 77–82; Meyer 2005) shows that its public visibility is very limited. Both Umbach and Meyer conducted quantitative research on quality press coverage of the EES. The results of both studies are very similar. Both show that media coverage was very event-related in the beginning, that is high peaks of media coverage can be seen around the Luxembourg and the Amsterdam Councils in 1997 and 1998 and some of the subsequent Councils on Employment and Social Affairs. All in all, media coverage of the EES has steadily declined since its launch. This differs from media coverage of the Stability and Growth Pact which, in contrast, has increased in recent

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years. Also, peer reviews did not receive wide attention in the media. However, in general media coverage of the EES was higher in Germany than in the UK since its introduction (Meyer 2005). Umbach summarizes the results of the study as follows: ‘We learned from our quantitative newspaper content analysis . . . that the EES did receive only little attention in the public debates of the two countries’ (Umbach 2004: 77). Domestic issues dominated media reports and ‘at the same time, these national events and employment policies are scarcely or not at all related to the EES’ (ibid.: 83). Thus, the overall conclusion reads that ‘public discourses on employment policy are still predominantly influenced by national policy cycles and agendas without substantial influence and references to European co-ordination’ (ibid.: 83). Also Meyer concludes rather pessimistically that media reports about the EES have ‘declined dramatically’, that EES recommendations are hardly mentioned in political debates at the national level, and that only ‘few home-based journalists and even less citizens will know that there is such a thing as the Luxembourg process’ (Meyer 2005: 143). The results of these media analyses suggest that the preconditions for the effectiveness of the EES are still weak as public awareness of the EES processes is quite low in Germany and the UK.

Explaining variation This chapter’s comparison of how policy actors in Germany and United use the EES in policy-making processes demonstrates that their responses are both different and similar. Here I will summarize these differences and similarities and provide explanations for the differences by referring to the background conditions discussed in the previous chapter. The main difference in how policy actors used the EES in Germany and the UK was that the UK government openly refused to take on certain EES recommendations. The areas where the UK government refused an influence by the EES are the establishment of a more co-ordinative ‘social partnership’ approach and the adjustment of rules for access to the New Deal for the long-term unemployed to the ‘activation’ targets of the EES guidelines (House of Commons 1999b: para 5.14; United Kingdom 2001: 8f.; House of Commons 2003a: para 9.8). In Germany, the government did not openly refuse to take EES recommendations into account in policy-making. Only the social partners emphasized that the EES should not intervene in wage-setting procedures since this is the preserve of the social partners (BDA/BDI 2000: 2; BDA 2001a: 2; DGB 2003a: 23). In contrast to Germany, the UK government repeatedly presented itself to

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its electorate as having ‘uploaded’ New Labour’s labour market policy approach to the EES (e.g. House of Commons 1997: para 12.7; Treasury/ DTI/DWP 2002). Overall, more policy actors in Germany than in the UK referred to the EES in the policy-making discourse in order to support their arguments or to criticize the government. Some policies such as the new ‘Hartz’ labour market reform and measures to integrate greater numbers of older people into the labour market were additionally supported by references to the EES in Germany (e.g. Deutscher Bundestag 1999a; Deutscher Bundestag 2001b). In the UK, references to the EES were rarely used to legitimate policy change, the only occurrence was linked to skills and training policies (DfES 2003). However, some policies in the UK were reformed so that they became more aligned with the EES, for example the reduction of waiting times to get access to the New Deal for Long-Term Unemployed and recent changes and plans to move more people from incapacity benefits and severe disability allowances into work. These reforms have, however, not officially been legitimized by references to the EES (Department for Work and Pensions 2006; House of Commons 2006). In summary, the UK government preferred the strategies of ‘uploading’ and ‘refusal’, whilst the German government mostly presented the EES as an additional reason for reforms (‘blaming’ the EU) (see Chapter 2). These differences can be understood by exploring the political and institutional contexts in both countries. First we can examine the role of the ‘goodness of fit’ between the EES and the domestic situation. In the UK the labour market situation was already quite close to or even outperformed EES targets when they were published in 2000 and the labour market policy approach was also quite similar to the EES since the mid-1990s. Therefore, there has been little pressure on the UK to change policies towards the EES. In Germany, unemployment is much higher than in the UK and several features of the labour market policies were not as close to the EES as it was the case in the UK. Therefore the European Commission had more reasons to issue recommendations to Germany and vice versa, German policy-makers may have welcomed some non-binding pressure from Europe which they could use to justify unpopular policy reforms. Since the EES recommendations are intensely discussed between the EU Commission and representatives of each member state before they are issued it is well possible that the recommendations have already been influenced by the policy plans of national policy-makers even if they are then framed in the context of the EES. This is what I called ‘invited dutifulness’ in chapter 2. A higher ‘misfit’ between the EES and the situation in Germany has therefore been a ‘window of opportunity’ to strategically use EES recommendations and objectives in the domestic policy-making

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discourse. In contrast, the better ‘fit’ in the UK has provided fewer incentives for the UK government to link domestic policy changes officially to the EES. The higher ‘misfit’ in Germany has, however, also been a hindrance to move closer to the EES in some areas. It has, for example, been difficult to legitimize further limitations to early retirement policies in a context where youth unemployment is very high (Federal Republic of Germany 2000: 46). The relevance of the ‘goodness of fit’ argument is also relativized if one examines the role of other factors such as the political system, the role of social partners and the relationship between the member state and the EU. The political systems in Germany and the UK are very different. The federal German system with many veto-points favours a ‘coordinative’ policy discourse (Schmidt 2000) in which the government is in a weaker position to carry through policy reforms and has to negotiate and deliberate with a greater number of policy actors in a more meaningful way. Therefore policy actors other than the government are more intensely involved in the preparation of National Action Plans. A coordinative political system also offers more opportunities to policy actors to deliberate in public and to criticize each other using ‘rational’ arguments. The EES therefore has a greater potential to be used in public discourses to legitimize changes or to set other policy actors under pressure in coordinative political systems. In comparison to Germany, the UK government is in a much stronger position to push through planned policy reforms and the political system favours a ‘communicative’ policy discourse. In such a discourse the government basically informs the public about policy reforms but this information does not serve to receive feedback from the more general public and to influence further policy-making. These differences in the political systems are an additional explanation why German policy actors used the EES more intensely in the policy-making discourse and why UK policy makers tended to present themselves as having ‘uploaded’ their own approaches to the EU agenda. It has to be stressed again that these usages of the EES primarily reflect the communicative strategies of policy actors in Germany and the UK but not the degree to which policy planning has ‘really’ been influenced by the EES. Differences in the social partner system are linked to those discussed regarding the political system. Social partners in Germany referred much more often to the EES than the UK social partners and tried to put the government under pressure to introduce reforms favouring their specific interests. This is not mainly due to differences of the ‘fit’ between the EES and the national situation but to the different positions of social partners within the political system. The German social partners are influential policy actors and the government consults with them at the national level

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on a regular basis. Moreover, in Germany social partners enjoy the autonomy to adopt collective agreements at the national level while the British system is characterized by voluntarism where social partners at the national level only play a weak role. Due to this stronger position of social partners in Germany, which entails a higher media presence of their statements, they have more incentives to strategically use the EES in policy-making discourses and to strengthen their position by referring to it. Finally, differences in the historical relationships between the EU on the one hand and Germany and the UK on the other frame the incentives for policy-makers to legitimize domestic policy changes by EU policies as well as their strategies in dealing with the EU. The EU has played an important role for Germany in the post-second world war period to re-integrate Germany into a democratic-liberal Western Europe. Public opinion towards the EU has always been more positive in Germany than in the UK. In the latter many struggles were occurring during the accession process in the early to mid-1970s and many politicians who saw Britain’s sovereignty as being in danger through EU accession took a negative stance on this issue. Legitimizing policy change in relation to EU policies is not a favourable option for British policy-makers because of public opposition to the EU’s influence on domestic affairs. The UK government’s strategy to present itself as ‘uploading’ policies to the EU agenda is part of New Labour’s approach to promoting a positive view on European integration by presenting themselves as the ‘leaders’ in Europe to its electorate. Since public opinion with regard to the EU is more positive in Germany, legitimizing policy change through referring to the EU is less problematic than in the UK. This is not to say that it is an entirely unproblematic process as a European backlash in the future is not out of the question. That being said the option of legitimizing policy change through references to the EU is more viable in Germany than in the UK. In addition, although Germany has a larger negative net-payment balance to the EU budget than the UK, Germany received a higher absolute amount of European structural funds payments until 2004 (European Commission 2005a). Therefore German labour market politicians at the national and regional level, particularly in the Eastern part of the country, had incentives to present policy reforms as an adoption of EES approaches in order to guarantee the receipt of structural fund moneys. Therefore, a combination of a higher ‘misfit’ between the EES and the national situation, a more ‘coordinative’ policy discourse and a more fragmented political system, a stronger position of the social partners, and a closer relationship as well as a more positive public opinion to the EU

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explains why policy actors in Germany used the EES more frequently and intensely to justify policy changes than in the UK. There are, however, not only differences in how policy actors in Germany and the UK dealt with the EES but also some similarities. Policy actors in both countries did not claim that the EES was a ‘motivator’ or the most important reason for policy reform. If policy actors justified policy changes through the EES they emphasized that the EES was only an additional reason for change. A second similarity was that actors in both countries only referred to those EES objectives and recommendations which suited their current political interests. The result being that the trade unions and the employer organizations in Germany emphasized very different aspects of the EES and tried to support disparate policies with it. The reasons for these similarities are linked to the character of the EES as a governance instrument. The EES covers a very broad and diverse programme. Since it is not legally binding, national policy actors can just choose the issues that support their current policy plans in order to receive some additional justification for policy changes towards EES objectives. It also happens rarely in both countries that EES objectives are concretely mentioned. Instead, references mostly point to the EES in general. However, the quantitative indicators are an exception in this regard because they are the most often referred-to concrete component of the EES. Another similarity in the usage of the EES is that policy-makers tended to neglect EES issues such as quality of work or the right balance between flexibility and security. The focus of references lay on ‘activation’, more inclusive labour markets, ‘making work pay’, the ‘flexibility of labour markets’ and ‘removing red tape’. The reference to the EES in the British skills policy did not emphasize skills as an aspect of quality of work but as an instrument to increase labour productivity. Overall it seems – and this has to be examined in further comparative studies – that the EES does not have the potential to strengthen these quality and security aspects against those aspects aiming at economic growth and efficiency. An explanation for this is that the EES is embedded in the powerful economic and financial policy framework introduced in the Lisbon Strategy and the Stability and Growth Pact which is prioritized by national policy-makers. To conclude, German policy actors ‘used’ the EES more intensely than in the UK to lobby for policy change or to justify planned reforms. This can be explained by a higher reform pressure in Germany where labour market situation and policy approaches are farther away from EES

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approaches than in the UK. Another important reason is that the political system in Germany and the position of social partners provides more incentives for the government to justify policy change in public (‘coordinative discourse’, Schmidt 2002: 209ff.) and more opportunities for non-governmental actors to take part in this public discourse. In addition, the Eurosceptic electorate in the UK prevents the government and most other non-governmental actors to publicly justify policy change through the EES or to press for a move towards EES approaches. The following chapters investigate the OMC’s effectiveness (Chapter 6) and legitimacy (Chapter 7) more generally. Chapter 6 contains further examples of how policy actors deal with the OMC in different EU member states.

Part III Evaluation

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6 Effectiveness

Evaluation framework This and the following chapter evaluate the OMC’s effectiveness and legitimacy. The introduction to this book argued that European social policy faces a dilemma in which tensions between effectiveness and legitimacy play an important role. One side of the dilemma is the fear that a purely market-making EU undermines the legitimacy of member state governments and the EU. This is thought to happen if market-making European integration puts pressure on national welfare systems and reduces outputlegitimacy achieved by effective social policies. The other side of the dilemma is that a stronger role of the EU in social policy is not regarded as appropriate and legitimate if the EU’s current political system remains as it is. A redistributive role of the EU would only be legitimate if it rested on a truly European parliamentary system. However, according to an influential view within the literature (e.g. Weiler 2002) the development of such a system cannot be realized due to the lack of a ‘European demos’. The book’s introduction also argued that the OMC was developed to respond to this dilemma. The OMC aims to strengthen the EU’s role in social policy and through a coordinated effort of all member states to reform national welfare systems to achieve more favourable policy outcomes. The strengthening of the EU’s role in social policy is, however, sought in a way that is legitimate and that even improves the democratic quality of the EU. An evaluation of the OMC must therefore investigate whether the OMC is successful in meeting these potentially contradictory expectations of being effective and legitimate at the same time. The evaluation that will be presented in this and the following chapter distinguishes between firstorder and second-order evaluation criteria. First-order evaluation criteria are derived from the goals to be achieved by the OMC that have been set by the 97

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EU. Second-order goals are derived from critical reflections upon these goals. This is justified because policy goals are often ambiguous and require interpretation. Moreover, policy goals are normally contested and can be criticised by formulating alternative goals. I will call this type of evaluation, which uses goals and criteria derived from reflections about explicitly stated policy objectives, ‘second-order’ evaluation. Table 6.1 sets out the first- and second-order criteria that are used in evaluating the OMC’s effectiveness and legitimacy. From a first-order perspective an evaluation of the OMC’s effectiveness must ask whether the OMC has been taken into account by national policy-makers, whether the OMC’s broadly defined social policy goals and quantitative targets have been achieved and whether a convergence towards targets occurred. From a ‘second-order’ perspective the evaluation must investigate the appropriateness of the quantitative targets as well as the capability of the OMC to strengthen ‘social Europe’ and to bring economic and social policy objectives into balance. Moreover, it needs to examine whether policy actors take the OMC contents into account in a balanced way and whether it not only leads to a convergence of policy outcomes but also of broader social policy approaches. The OMC’s legitimacy must be first-order evaluated by investigating whether the explicitly stated goals of a broader participation of a range of political actors in OMC processes has been achieved and whether the OMC is in accordance with the principle of subsidiarity. From a ‘secondorder’ perspective further goals and evaluation criteria can be formulated, for example, whether the OMC processes are transparent and accountable, whether the OMC embodies a new model of directly-deliberative democracy for the EU and how appropriate this model is for a future design of democracy in the EU. Furthermore, one can examine the legitimacy of ‘soft’ OMC influence on national policy-making and whether the OMC could be a means of increasing the EU’s overall legitimacy. Tensions in the OMC goals An evaluation of the OMC also has to consider the relationship between these different goals. One main argument of this book is that the goals of the OMC are not entirely coherent. In contrast to various other accounts concerning the OMC, this book takes the position that these tensions are a hindrance to the achievement of its goals. One can identify three types of tensions related to the OMC. The first exists between the aim of supporting the convergence of member states’ social policies and outcomes towards targets defined by the EU whilst the OMC attempts to respect member states’ authorities in social policy

99 Table 6.1

Criteria for evaluating the OMC

Effectiveness-related goals

‘First-order’ goals and criteria

‘Second-order’ goals and criteria

Social policy goals of the OMC

OMC is taken into account at the member state level Modernization of the ‘European Social Model’ Achievement of broadly defined social policy objectives and quantitative targets Convergence towards quantitative targets

OMC content is taken into account in a balanced way at the member state level Appropriateness of the quantitative OMC indicators

Convergence

Changing the relationship between economic and social policy goals in EU integration

Democracy-related goals

Does the OMC strengthen ‘social Europe’through supporting market-correcting policies at the member state level? Do the OMC and the ‘third way’ theory bring economic and social policy objectives into balance? ‘First-order’ goals and criteria

Democratic quality Participation of nonof OMC processes governmental actors, regional and local authorities at the EU and the national level

Legitimacy

Source: author.

Convergence of domestic social policies towards the broad OMC objectives?

Is the OMC coherent with the Treaty of the European Communities? Respecting the principle of subsidiarity

‘Second-order’ goals and criteria Transparency of OMC processes Accountability of actors in OMC processes Directly-deliberate democracy embodied in the OMC as new democracy model for the EU? Legitimacy of ‘soft influence’ on national social policy Increasing the overall (output-) legitimacy of the EU through the OMC?

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and the principle of subsidiarity. Indeed, formally the member states’ authorities are not constrained by the OMC because every policy change would have to be approved by national parliaments even if the incentives for ‘policy learning’ originate from the EU. It can, however, be regarded as an informal and, possibly opaque, pre-structuration of national policy-making if the OMC objectives and targets are adopted by bodies not accountable to EU citizens. This suspicion also relates to the quantitative indicators that are applied in several OMC processes because these indicators are approved in insufficiently transparent processes by the Employment and Social Protection Committees and are one of the most potentially influential aspects of the OMC processes in terms of national policy making. In summary, one of the major tensions within the OMC is that it seeks to be effective and tackle several social problems by promoting a new approach to social policy in Europe, but the resources and capabilities of the EU are restricted in enforcing these processes. Moreover, I argue that the ways in which the OMC plays a role for national policy-making poses a problem of legitimacy. Secondly, there is a tension between the economic objectives of the EU on the one hand1 and the social policy objectives of the OMC on the other. Since the OMC is not legally binding and cannot be enforced by the EU, it remains unclear whether the OMC is able to strengthen ‘social Europe’ or even bring economic and social policy objectives into balance. My observations in relation to this particular tension stand in contrast to other more positive commentators on the OMC, for example Ferrera and Rhodes (2000), Begg and Buffels (2002), Borrás and Jacobsson (2004) and Zeitlin (2005b). Related to this imbalance between the economic EU objectives and the OMC, there are also tensions within the OMC. Some tensions exist between different strands of the OMC, for example between the economic and social policy coordination, in addition, some tensions exist within individual strands of the OMC, for example between flexibility and security of labour markets, or the sustainability and appropriateness of pensions. These tensions have thus far remained under-explored within the OMC literature and the argument of this book is that the OMC goals which are more coherent with the EU’s economic objectives will be more likely to influence national policy-making than the market-correcting goals.

The OMC’s effectiveness The OMC’s role in national policy-making The remainder of this chapter evaluates the OMC’s effectiveness. The first question addressed in this evaluation is whether member state

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governments have taken the OMC into account in national policymaking. This question is relevant to an evaluation of the OMC’s effectiveness because the OMC cannot be effective if it does not play a role in national policy-making. This has been explicitly stated in the EES where the Treaty of the European Communities stipulates that national policy actors should respond to the objectives of this strategy: ‘The Council . . . shall each year draw up guidelines which the member states shall take into account in their employment policies’ (Art. 128, 2; emphasis M.B.). First, member states have to respond to the OMC in procedural terms. That means they have to produce reports, deliver data and sometimes to reorganize coordination between different parts of the government, as well as between the government and non-governmental actors. Several OMC scholars report that the OMC changed the way in which different government departments are coordinated and how governments communicate with social partners, NGOs and regional and local authorities. For example, a new ‘National Committee for Social Dialogue on European and International Questions’ was set up in France in 1998 which deals with the OMC (amongst other issues) (Erhel, et al. 2005: 239f.); gender equality units are claimed having been strengthened through the gender mainstreaming aspects of the European Employment Strategy (Rubery 2005); in Italy ad-hoc commissions were set up concerned with preparing the National Action Plan in 1998 and 1999 (Ferrera and Sacchi 2005), in Denmark, the Netherlands and Italy the merger between employment and social assistance offices has been promoted; and in Belgium and Austria new mechanisms for the coordination between the national and regional levels of government concerned with the National Action Plan preparation have been created (Zeitlin 2005b: 458f.) Zeitlin also states that almost all member states report changes in the national statistical monitoring system (ibid.). Therefore the OMC has an impact on governance systems and this can, subsequently, influence policy-making and policies. Secondly, the OMC apparently plays a role in shaping general orientations and approaches in social policy across member states. Since the end of the 1990s a European-wide move towards a common orientation in social policy approaches is observable. A majority of member state governments officially pursue ‘third way’ approaches which emphasize supply-side economic and labour market policies, ‘activation’ and ‘employability’, deregulation and flexibilization of labour markets, work as ‘the best route out of poverty’, the reform of social security systems to ensure their sustainability and to avoid ‘disincentives to take up work’. This trend is reported by many comparative accounts of recent social

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policy developments (Lødemel and Trickey 2000; Esping-Andersen, with Gallie et al. 2002; Clasen and Clegg 2004; Tayler-Gooby 2004). An example for the view that the OMC played a role for this common trend in the EU is a statement by Zeitlin: ‘These OMC processes have contributed to broad shifts in national policy orientation and thinking, involving the incorporation of EU concepts and categories into domestic debates’ (Zeitlin 2005b: 451). Therefore the influence of the OMC seems mainly to take place at the level of general policy frames. There are, however, some examples where member states claim that the OMC had an impact on specific policy programmes. Chapter 5 provided examples demonstrating that the German government referred to the European Employment Strategy in order to additionally justify a stronger ‘activation’ approach in labour market policy. Research on France and the Netherlands also claims that the OMC was used in both countries to reinforce their ‘activation’ strategies (Erhel, Mandin et al. 2005; Visser 2005). In Sweden tax reforms were introduced in line with the OMC and the pension system was reformed in France, equally consistent with the OMC. Interviewees in both countries denied, however, that the OMC has played an important role in these policy changes (Erhel et al. 2005; Jacobsson 2005; Visser 2005). Overall, it is not possible to prove causal links between the OMC and these developments. Some of these changes were initiated and supported before the OMC has been introduced, for example the strategy of preventing unemployment in Germany and France, and activation in the Netherlands and Ireland (Zeitlin 2005b: 451f.). The OMC is also not the only external influence on domestic policy development since other international organizations such as the OECD and the UN promote similar approaches regarding activation, gender mainstreaming and gender equality (True and Mintrom 2001; Dostal 2004). Moreover, member states are keen to ‘upload’ (Börzel 2002) their own policy approaches to the European level so that the establishment of EU social policy objectives is not a one way process but a ‘two-level game’ in which the objectives are influenced by the ideas and approaches already existing at the member state level (Zeitlin 2005b: 454ff.). In addition, concrete policy programmes still differ in various aspects across member states and many authors emphasize that specific social policy programmes may only work in specific contexts but not in others. This may hinder a simple transfer of ‘best practices’ from one country to another without adjusting the programme to the specific context. But overall one can argue that the OMC provides a framework for policy reform, has had an influence on the adoption and further development of general policy approaches and worked as a ‘catalyst’ for policy development in a range of member states.

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Thirdly, as was demonstrated in Chapter 5, domestic policy makers deliberately use the OMC in policy-making processes to justify existing policies and planned policy change, or to press for reforms. For example, the government and other policy actors in Germany referred to the OMC in order to support stronger ‘work incentives’ as well as to prolong labour market participation of older workers. In the UK and in Germany employers refer to the OMC to promote low non-wage labour costs, labour market deregulation and flexibility, the same is the case in Sweden and Denmark (Jacobsson 2005: 117f.). A comparison of different member states demonstrated that the intensiveness of policy actors’ responses to the OMC is related to the degree of ‘misfit’ between the EES objectives and national performance, as well as to the political system, the role of social partners and the country’s relationship to the EU (Büchs 2006). While, for instance, the ‘misfit’ between the EES and domestic performance is similarly wide in France and in Germany, policy actors in France made less ‘usage’ of the EES in the policy-making process. This can be explained by the more fragmented and federal political system in Germany. A Eurosceptic electorate limits the incentive for policy actors to refer openly to the OMC in policy-making processes which becomes apparent when comparing the UK and Ireland – in the latter the OMC is much more explicitly integrated in policymaking processes than in the UK. Overall, the OMC has therefore the potential to change policy-making processes because it can provide additional arguments and justifications for policy actors who want to carry through policy reforms compatible with the OMC. So far, there is however little evidence that less powerful actors such as trade unions and anti-poverty associations can profit from this provision of arguments through the OMC – as it had been hoped by some OMC scholars (Jacobsson 2005: 109) – but that mainly those who use it successfully are usually already in powerful positions. In summary, the results regarding the OMC’s ‘influence’ on member state policies and policy-making are mixed. While most governments claim that the OMC has not been the sole reason for introducing significant policy changes there are many indications that the OMC is strategically used by policy actors and that it has a catalysing effect on national social policy developments. ‘Symmetry’ of using the OMC The OMC is based on a ‘third way’ social policy approach which consists of inherently conflicting values and objectives (see Chapter 3). Therefore, a second-order evaluation of the OMC’s effectiveness needs to address the

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question of whether national policy-makers take the content of the OMC into account in a balanced way. This question is formulated from a second-order perspective because it is not stated by the Commission or Council. Rather, the Council expects that, for example, the guidelines of the European Employment Strategy will play different roles for policymaking at the member state level according to national contexts: ‘The implementation of the ‘guidelines’ may vary according to their nature, their impact on member states and the parties to whom they are addressed’ (European Council 1997: para 14). While it is true that there are different ‘gaps’ between existing policies and the OMC goals in different member state national policy-makers should be required to take the OMC objectives into account in a balanced way. This could be realized by a systematic check of existing national policies against OMC objectives. If such a systematic check is lacking there is the danger that national policy-makers are ‘cherry picking’ those aspects which they find most favourable in the current policy process. If the OMC objectives are not taken into account in a balanced way this may be detrimental to achieving the more general goals of the OMC such as the ‘strengthening of social Europe’ as well as the eradication of poverty and the establishment of full employment. The empirical research in Germany and the UK presented in Chapter 5 demonstrated that policy actors in both countries tended to use the EES to strengthen political demands for flexibilization, deregulation, increasing responsibilities of the unemployed to get a job and of individual workers to remain ‘employable’. It was not successfully used, for instance in the UK, in order to strengthen the rights of unemployed and workers or to enhance ‘social partnership’ at the national level. Also the latest Joint Employment Report stressed that ‘flexicurity’ and ‘quality of work’ have not received as much attention by member state policy makers than other objectives of the European Employment Strategy and that more needs to be done to set these goals into practice (Council of the European Union 2006a). The Council and Commission themselves have criticized in its Joint Employment Report that implementation of the four pillars of the EES has been uneven in the member states: While a lot has already been achieved, there is an uneven implementation of the four pillars, at least judging from what the member states report. This is particularly true for the adaptability pillar, and – to a lesser extent – for the entrepreneurship pillar (Council of the European Union 2000: 8).

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In the 2002 Joint Employment Report, the EU assessment sounded milder, but it still criticized that the implementation of the quality-ofwork objective was uneven and insufficient. Research on how the OMC has been used in other member states also suggests that politicians often ‘cherry pick’ aspects of the OMC according to their political interests so that only those aspects of the OMC are used which suit their current policy plans. Visser, for example, suggested that the EES is a ‘strategy for all seasons’ that can be used in very different ways by politicians of oppositional convictions (Visser 2005: 199f., 207). Several governments seem to publicly refer to the OMC in order to legitimize otherwise rather unpopular policy changes as it was the case in the German ‘Hartz reforms’ (see Chapter 5). Furthermore, the French government used the National Action Plans to ‘rationalize’ an increasing trend towards supply-side labour market policies and ‘incentives’ for taking up work (Erhel et al. 2005: 223, 235). Visser reports that both, the social democratic and the centre-right government in the Netherlands used the EES, though not publicly, to legitimize their version of activation policy which was opposed by the other party (Visser 2005: 199f.). Research on Italy has demonstrated a similar trend that the EES objectives are so unspecific that they could be interpreted and used in different ways by the leftist ‘Olive Tree’ and the right-extremist Berlusconigovernment (Ferrera and Sacchi 2005: 148). This indicates that a balanced usage of the OMC cannot be guaranteed and that it is rather instrumentalized by governments or parties of very different convictions. Another example for ‘cherry picking’ is that employers and trade unions refer to the EES in very different ways, supporting their own agendas (see Chapter 5). This was not only the case in Germany and the United Kingdom but is also reported by Jacobsson (2005: 117) about Sweden where the employers refer to the EES in order to support their demands for lower taxation while the trade unions aimed to bring the employers back into tripartite negotiations based on the EES. Consequently, it depends on domestic power-relationships what policy reforms are finally adopted and what outcomes in terms of social exclusion and social inequality they produce. During the last years several social-democratic governments have been succeeded by centre-right governments in the EU, for example in Denmark, Finland, France, Germany, Greece, Italy,2 the Netherlands and recently also Sweden. This makes it more likely that governments in the majority of member states do not pay attention to the whole range of policies promoted by the OMC but mostly use to the OMC to support rather unpopular policy changes which fit with the ‘competition’ agenda of the Lisbon Strategy as it was

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found in the social democratic governed Germany and the UK (see Chapter 5). More in-depth and comparative studies are however required to find out which policy changes were supported by referring to the OMC in different countries and whether or not policy actors make a balanced use of the OMC agenda. This imbalance in implementation can again be explained by the openness for interpretation of many of the OMC objectives and the lack of sanctions if the OMC is not applied or taken into account in an unbalanced manner. It remains speculative and outside the scope of this study to identify the extent of the uneven attention to the individual aspects of the OMC that has occurred in other member states. Furthermore, as has been demonstrated in Chapter 3, the OMC’s ‘third way’ agenda itself is not constructed in a balanced way because it prioritizes economic and employment growth as well as the financial sustainability of social security systems over the quality and security of working conditions and the adequacy of benefit levels to combat poverty. One reason for this is that the EES is required to be in line with economic policy-coordination (Art. 126, 1 Treaty of the European Communities) and that the OMC in social inclusion and social protection is aligned with the Lisbon Strategy’s ethos of competitiveness (European Council 2006: b). This suggests that an adoption of a ‘balanced third way’ model is likely to be impeded from the outset. Achievement of the OMC objectives If a balanced usage of the OMC at the national level is a precondition for the achievement of the explicitly stated OMC goals the above findings suggest that the way in which the OMC has been employed might have been detrimental to goal achievement. Whether or not this has been the case is investigated in this section. I will firstly discuss whether the OMC has contributed to the ‘modernisation’ and ‘strengthening’ of the ‘European Social Model’, a goal stated in various European Council conclusions (European Council 2000a: appendix para 31).3 Initially, it appears to be quite difficult to judge whether the aim to ‘modernise the European social model’ has been reached because both the ‘European social model’ and the ‘modernization’ of this model are very general concepts. One therefore needs to define what is meant by the ‘European social model’ and its ‘modernization’ more precisely. From the perspective of a ‘firstorder’ evaluation, one must rely on the European Union’s definition of these concepts. These definitions become clearer if the more specific goals of individual OMCs are considered because they constitute the EU’s ‘operationalization’ of what a stronger and modernized social Europe

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means. At a general level, one can argue that the OMC has contributed to the ‘modernization’ of the ‘European Social Model’ because it has re-vitalized the discussion about this model and provided a clearer picture of how the EU defines it. The EU had already laid out its approach to social policy in its White Papers on Social Policy and Competitiveness in the mid-1990s (European Commission 1994a; European Commission 1994b). However, the OMC has provided a more detailed and further developed account of the way in which the EU defines its approach to social policy. Moreover one can claim that this ‘third way’ ‘European Social Model’ has informed social policy discussions in most member states (see above). In spite of this, national policy-makers have not justified social policy change by a requirement to build a common ‘European Social Model’. It is therefore questionable that the ‘European Social Model’ has been strengthened in the sense that national policy-makers increasingly pursue, and electorates support, the establishment of a common ‘European Social Model’ or a stronger role of the EU in social policy-making. However, the OMC’s effectiveness needs to be evaluated in more detail by examining whether its more specific social policy objectives have been achieved. To recall some of these goals one can study several Council conclusions and the OMC objectives that they establish. For example, according to the Lisbon Council conclusions, all OMCs aim to achieve ‘full employment’ (European Council 2000b: para 6), and the main goal of the OMC within social inclusion is the ‘fight against social exclusion and the eradication of poverty’ (European Council 2000a: annex). The first overarching objective for the OMC social inclusion and social protection is the promotion of ‘social cohesion, equality between men and women and equal opportunities for all through adequate, accessible, financially sustainable, adaptable and efficient social protection systems and social inclusion policies’ (European Council 2006: 1). However, these objectives remain very broad, and more precise indicators are required to attempt to measure whether they have been achieved. The EU’s Social Protection and Employment Committees have developed quantitative indicators in several areas covered by the OMC in order to facilitate a comparison of social policy performances between member states. These indicators can be directly used to measure the achievement of some of the OMC goals. The development of indicators is most advanced within the European Employment Strategy, but indicator-building in the OMC social inclusion and protection has also rapidly moved forward with the adoption of a common portfolio in 2006 (European Commission 2006d). The most prominent of the OMC targets establish that by 2010 the EU-25 should reach an overall employment rate of 70 per cent, a female

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employment rate of 60 per cent and a 50 per cent older workers’ employment rate. For the European Employment Strategy, the Employment Policy Committee has adopted 66 indicators and a range of quantitative targets for labour market performance, quality of jobs (such as work accidents and job satisfaction), labour market inequalities (such as pay gaps between different groups and regional unemployment disparities), workforce qualification levels, and the effective age of labour market exit.4 In the ‘Portfolio of Overarching Indicators’ in the streamlined OMC social inclusion, pensions and health, the Social Protection Committee developed one set of indicators each for the overarching, social inclusion, pensions, and health objectives (European Commission 2006d).5 These indicators do not define targets to be reached by a certain point in time but are only to be used to monitor performance of social policy outcomes at the national level. For example, indicators on the overarching objectives cover the measurement of poverty, income and health inequality, unemployment, social expenditure and replacement rates. The social inclusion indicators are all designed to measure the extent and character of poverty and social inequality in the EU member states and cover a range of related aspects such as housing, material deprivation, early school leavers, child-well being, some of which remain to be developed. The pension indicators measure the extent of poverty among older people, replacement ratios of pensions and the sustainability of pensions. The health indicators are still provisional. So far they cover the health of the EU population, for instance measured by life expectancy, mortality rates, self-reported unmet need for medical and dental care, as well as the sustainability of health care systems by health expenditure data (European Commission 2006d). An analysis of the current figures related to some of these indicators demonstrates that there has been progress towards some but not all of these goals and that regarding the European Employment Strategy there are still large gaps between current performance and the targets for 2010 (see Table 6.2). Not only scholars critical of the OMC but also the EU itself stresses that the OMC objectives have not yet been fully achieved in the member states. Important evaluations of the OMC have been provided by the review of the Employment Strategy by the Employment Task Force (Employment Task Force of the European Union 2003) and the High Level Group review of the Lisbon Strategy (High Level Group 2004), both chaired by the former Dutch Prime Minister Wim Kok. The recent Joint Employment Report (Council of the European Union 2006a) and Joint Report on Social Protection and Social Inclusion (Council of the European Union 2006b) also provide evaluations by the EU. These reports state that

Effectiveness Table 6.2

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Quantitative employment strategy targets and current achievement

Target

EU-15

EU-25

Overall employment rate of 70% until 2010 and of 67% until 2005

65.1% (2005)

63.8% (2005)

Female employment rate 60% until 2010 and of 57% until 2005

57.4% (2005) 47.0% (FTE 2004)

56.3 % (2005) 47.2% (FTE 2004)

Employment rate of older workers (55–64) of 50% until 2010

44.1% (2005)

42.5% (2005)

Provision of a measure of ALMP for young persons before reaching six months of unemployment

No data available

No data available

Provision of a measure of ALMP for adults before reaching 12 months of unemployment

No data available

No data available

25% of the long-term unemployed participate in a measure of ALMP by 2010

No data available

11 member states (2005)6

At least 85% of 22 year olds should have completed upper secondary education by 2010

73.7% (2004)

76.6% (2004)

12.5% of adult working age (25–64) population participating in life long learning by 2010

11.9% (2005)

10.8% (2005)

EU average of no more than 10% early school leavers by 2010 90% childcare for children between 3 and mandatory school age

16.9% (2005)

14.9% (2005)

No data available

‘far from being reached’

33% childcare for children 0–3

No data available

Increase of effective average labour market exit age of 5 years until 2010 (from average 59,9 in 2001)

60.7 (2004, provisional)

‘far from being reached’7 61.0 (2004, provisional)

Sources: Employment in Europe 2005 (European Commission 2005b), Joint Employment Report 2005/2006 (Council of the European Union 2006a), Eurostat, European Commission (2006c).

despite some progress towards the common objectives there are considerable ‘implementation gaps’ (Council of the European Union 2006b: 10). Therefore the Council urged that ‘it is essential to move up a gear in implementing the Lisbon Strategy’ (Council of the European Union 2006a: 3). These ‘implementation gaps’ can first be demonstrated by examining the achievement of the quantitative targets defined in the European Employment Strategy as well as performance measured by indicators in

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the OMC social inclusion and protection. Subsequently I will analyse which policy areas are particularly identified as insufficiently achieved in the Joint Reports. While some data regarding the employment indicators is not yet available for all EU member states, data for the main indicators demonstrates that the goals for 2005 have not been reached and that the ambitious objectives for 2010 are still far away from achievement. Employment rates in the EU-25 have risen from 61.2 per cent in 1998 to 63.8 per cent in 2005. The target of an overall employment rate of 67 per cent to be reached in 2005 has therefore been failed. Since the growth of the gross domestic product (1.6 per cent in 2005) and employment (0.9 per cent in 2005) is currently low at the EU-25 level, it does not seem likely that the Employment Strategy targets of an employment rate of 70 per cent will be reached by 2010. Female employment rates in the EU-25 have considerably risen from 51.8 per cent in 1998 to 56.3 per cent in 2005. The goal to reach a female employment rate of 57 per cent in 2005 remains, however, unachieved. The growth of female employment was 1.1 per cent in 2005; therefore it is unclear whether the 60 per cent target for female employment rates can be reached by 2010. Though these figures for female employment rates are closer to the target than average rates, it must be noted that they cover a large share of women in part-time employment. Taking into consideration the full-time equivalent employment rates at EU level the situation of female employment looks less promising. The full-time equivalent female employment rate for the EU-25 increased from 46 per cent in 2000 to 47.2 per cent in 2004. Measured in full-time equivalents, the female employment rate is still about 13 percentage points away from target for 2010. Also the employment rate of older workers has constantly increased at the EU-25 level during the last years – from 35.8 per cent in 1998 to 42.5 per cent in 2005. However, this figure is still far away from the goal to reach an employment rate of older workers of 50 per cent by 2010. When the EES was introduced it set targets regarding the provision of active labour market policy measures for young and adult unemployed. These targets required that young persons (15–24 years old) became eligible for active labour market policies (without intensive counselling and job assistance) before six months of unemployment and adult persons (25 years old and above) before twelve months of unemployment. Currently there is no data available for the whole of the EU in relation to these targets. However, the 2006 employment indicator compendium demonstrates that the UK is currently the only country which claims to fulfil these

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goals (for many countries, data are still missing) (European Commission 2006c: 56).8 The compendium also states that only 11 of the 25 member states fulfil the target to integrate at least 25 per cent of the long-term unemployed into labour market policy measures. The European Employment Strategy also formulated goals related to education and life long learning. One of them is that at least 85 per cent of 22 year olds should have completed upper secondary education by 2010. The share of young persons in the EU-25 attaining at least upper secondary education has risen from 76.3 per cent in 2000 to 76.9 per cent in 2005. If this trend does not enormously accelerate it is unlikely that the goal of 85 per cent will be reached in 2010. Regarding life long learning the EU set the target that at least 12.5 per cent of working age adults (25–64) should participate in life long learning by 2010. In 2000 7.9 per cent of the working adults in the EU-25 took part in life long learning. This figure has risen to 11.0 per cent in 2005. The target therefore seems to be achievable if a strongly increasing trend in life long learning is maintained. A further education target is the reduction of the share of pupils who leave school early to 10 per cent by 2010. This figure shrank from 17.7 per cent in 2000 to 15.2 per cent in 2005 for the EU-25. Another objective concerns the average effective labour market exit age and asks member states to increase this age by 5 years by 2010 from 59.5 in 2001. The average effective labour market exit age was 60.7 for the EU-25 in 2005 (provisional) and therefore the exit age has risen by 0.8 years between 2001 and 2005. This slow pace of development indicates that the achievement of the target by 2010 is unlikely. The set of employment guidelines in 2003 contained further objectives which were not stated quantitatively. And finally member states were asked to set their own national targets. The latest Joint Employment Report notes that ‘18 Member States have set national targets on employment rate[s], 15 for women and 11 for older workers’ (Council of the European Union 2006a: 8). These figures show that the European Employment Strategy’s effectiveness is critical since most targets have not yet been achieved. Currently it also seems unlikely that its targets for 2010 will be met. So far, no quantitative targets have been agreed in relation to the OMC in the areas of social inclusion and social protection. However, the Social Protection Committee developed a range of quantitative indicators to measure the development regarding the fight against poverty, social inequality, the sustainability and adequacy of pension systems as well as health care (European Commission 2006d). Examining performance regarding these indicators demonstrates that there is progress in some

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areas whilst the situation regarding the most important indicators is stagnating. For example, poverty has not been reduced in the EU since the late 1990s. Since 1998 the at-risk-of-poverty rate, measured as the percentage of the population living below 60 per cent of the median income after social transfers, oscillates between 15.0 and 16.0 per cent. Between 2003 and 2004 it increased from 15.0 to 16.0 per cent in the EU-25 and from 15.0 to 17.0 per cent in the EU-15 and in the Eurozone (Eurostat). Children and older people are particularly affected by poverty. Poverty rates of these groups also rose, that of children (children aged 0–16) from 19.0 per cent in 2003 to 20.0 per cent in 2004 in the EU-25 and from 18.0 per cent to 20.0 per cent in the Eurozone. Similarly, poverty rates of older people increased from 17.0 per cent in 2003 to 18.0 in 2004 (Eurostat). Unemployed people and lone parents are also disproportionately affected by poverty (Commission of the European Communities 2005a: 6). There are further important indicators for the OMC social inclusion, for instance the persistent rate of poverty and the number of people and children living in jobless households. However, no EU-wide data are available yet for these indicators. Not only has the poverty rate risen between 2003 and 2004 but so too has the inequality of income distribution. Income inequality, measured as the income quintile share ratio, increased from 4.6 in 2003 to 4.8 in 2004 in the EU-15 and EU-25 and in the Eurozone from 4.5 to 4.8. Inequality of income distribution measured by the Gini coefficient9 has risen in the EU-25 from 29.0 in 2003 to 30.0 in 2004 (for the first time since 1998), it remained the same (30.0) in the EU-15 but rose from 28.0 to 30.0 in the Eurozone (Eurostat, 23 September 2006). According to the non-achievement of the employment targets and the apparent difficulties to reduce poverty, both the current Joint Employment Report and the Joint Report in Social Protection and Social Inclusion identify several areas where member states should undertake more efforts to achieve the OMC goals. The recent Joint Employment Report stresses that more people should be integrated into the labour market and that existing strategies do not sufficiently address the most vulnerable groups such as young people, women, older workers, disabled people, immigrants and minorities (Council of the European Union 2006a: 3f.). The report particularly emphasizes that the potential contribution of female employment to a raise of overall employment rates is often overlooked and that an increase in the provision of childcare facilities, which could contribute to more women entering the labour market, has not reached the targets (ibid.: 10).

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The Joint Employment Report also asks member states to expand investment in ‘human capital’ (ibid.: 3). On the one hand investment in human capital aims to increase employment productivity. On the other hand, ‘life long learning’ approaches are assumed to contribute to a better match of labour supply and demand and to ease the adaptation to labour market changes also of older workers. Therefore the Joint Employment Report also recommends providing more training opportunities to older workers (Council of the European Union 2006a: 14). Also the Joint Report on Social Protection and Social Inclusion is concerned with raising education and skills levels but emphasizes that disadvantages in education need to be addressed as well, for example through the reduction of early school leavers (Commission of the European Communities 2005a: 6f.). The share of early school leavers dropped from 17.7 per cent in 2000 to 14.9 in 2005 in the EU-25. This share is, however, still far away from 10 per cent target of the European Employment Strategy. The Joint Employment Report also discusses ‘flexicurity’ and quality of work. It warns that the segmentation of labour markets is increasing and that therefore new ‘flexicurity’ approaches need to be developed. The report proposes, for example, to facilitate occupational and geographical mobility while at the same time offering security to those who have to adapt to labour market changes (Council of the European Union 2006a: 4). Moreover the report suggests that the implementation of ‘quality of work’ criteria has been insufficiently implemented and that more should be done to ease the transition from low paid and temporary jobs to permanent ones and to offer more opportunities for further training and life long learning (Council of the European Union 2006a: 8). Both reports mention that regional disparities are still considerably wide and need to be addressed (e.g. Council of the European Union 2006b: 6). The Joint Report in Social Protection and Social Inclusion asks member states to undertake more efforts to provide equal access to quality services and expresses concern that access to long term care is already insufficient (Council of the European Union 2006b: 13). The report also criticizes that the monitoring and evaluation systems are still insufficiently developed in some member states and that the links between the OMC and the Structural Funds need to be strengthened (Council of the European Union 2006b: 7, 9). The objective of the adequacy of pensions is measured by the risk of people aged 60 and over to experience poverty as well as by the relative income of people in this age group. As mentioned above the at-risk-ofpoverty-rate of people aged 65 and over increased from 17 per cent in

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2000 to 19 per cent in 2004. Also the income of people aged over 65 has decreased in relation to the income of the population aged 64 and under from 88 per cent in 1998 to 86 per cent in 2001 (more current data are not available). Performance regarding the goal of the adequacy of pensions therefore deteriorated during the last years. The objective of pension sustainability is measured by employment rates of older people and the effective age of labour market withdrawal (see data for both indicators above). Furthermore, data on pension expenditure and public dept and deficits are used. The expenditure on pensions as a percentage of GDP has slightly increased from 12.1 per cent in 1998 to 12.3 per cent in 2003. General government gross debt as a percentage of GDP has increased during the last couple of years in the EU-25 from 60.5 per cent in 2002 to 63.4 per cent in 2005. General government net balances as a percentage of GDP have, however, decreased in the EU-25 from ⫺3.0 per cent in 2003 to ⫺2.3 per cent in 2005. In summary, one can on the one hand observe common trends towards some of the OMC objectives and targets in the EU member states. On the other hand, there are still wide gaps between the actual performance and these targets. From a ‘first-order’ perspective, the majority of the OMC objectives have so far not been achieved. However, one has to bear in mind that this non-achievement is affected by a variety of factors so that it cannot solely be blamed upon a misconceptualized or ill-implemented OMC. Social policy through indicators From a ‘second order’ perspective one can discuss the suitability of the OMC targets and objectives. Quantitative indicators, even if non-binding, are likely to exert stronger pressure for policy adaptation than broadly formulated policy goals. The reason is that they are more precise tools for labour and social policy monitoring. If member state governments are aware that the EU Commission and Council or other non-governmental national policy actors can use the indicators to monitor and compare performance (even only in the capacity of ‘naming and shaming’) they will be more inclined to address these indicators in policy-making processes and to make efforts to achieve the targets. On the other hand, if performance is good governments can refer to targets and indicators in order to demonstrate the success of their strategies. Furthermore, the democratic quality of the processes in which the indicators are adopted needs to be evaluated if these indicators inform national policy making. I will firstly ask whether there is evidence that quantitative indicators indeed play a more important role for national policy-making than the

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broader OMC goals. The analysis of policy documents in Germany and the United Kingdom in Chapter 5 suggests that this is the case. In both countries, policy makers more often referred to the concrete OMC indicators and targets than to more broadly formulated OMC objectives, for instance, to the goals of providing access to active labour market policies for unemployed people before the six or twelve months threshold (SPD/ Bündnis 90/Die Grünen 1998a: 5; House of Commons 1999b: para 5.14; House of Commons 2003b: para 9.8). These findings demonstrate that the appropriateness of using quantitative indicators needs to be evaluated. This section argues that the usage of quantitative indicators can be problematic due to several reasons. First of all, the quantitative indicators and targets are not adopted in a democratic process at the European level. Instead they are produced ‘behind closed doors’ by the Employment and Social Protection Committees. Indicators can be used to ‘depoliticize’ the social policy process by providing seemingly value-free and objective measurements of policy outcomes or policies. However, decisions on indicators are also based on normative decisions. Since they have the potential to be influential political instruments in a European benchmarking exercise, indicators and targets need to be constructed very carefully. For example, broad social policy concepts such as ‘full employment’, ‘activation’, and ‘fighting social exclusion’ can be defined and, accordingly, measured very differently, depending on political convictions. Even if a political compromise on the broader meaning of a concept has been adopted, for example to regard poverty as a multidimensional concept which should be measured in relative terms, there is still a lot of leeway as to how exactly the indicators should be designed. It makes, for example, an immense difference whether poverty is measured by the threshold of people living on an income below 40 or 60 per cent of the median income. The difficulty of setting quantitative indicators can be demonstrated by the criticism that has been brought forward regarding some of the employment indicators. Some authors have, for example, bemoaned that the employment rates include young people which does not take into account the different levels to which young people are integrated into education systems in different member states (e.g. Erhel et al. 2005: 221). Secondly, the employment rates do not consider the amount of part-time work undertaken by different groups. It would be more accurate to measure the employment rates in full-time equivalents which does not just calculate the number of people in work but also the amount of time they spend on their job (ibid.). In addition, it has been criticized that the employment indicators are more focussed on input than on output (Zeitlin 2005b: 475)

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and that there are no adequate indicators to measure gender gaps and gender segregation on labour markets (Rubery 2005: 410). In the discussion on the usage of indicators in social policy, T. Atkinson has developed a list of criteria to judge on the quality of social indicators. He stated that an indicator should be robust and statistically validated, should be measurable in a sufficiently comparable way across Member States, and should be timely and capable of revision (Atkinson, et al. 2004: 52). Moreover, a set or portfolio of indicators ‘should be balanced across dimensions, indicators should be mutually consistent and of proportionate weight, and the portfolio should be transparent and accessible to citizens’ (O’Connor 2005: 350). Since Atkinson was a key advisor to the OMC indicator group it aimed to use these principles. However, these principles are not fully applied in the European Employment Strategy which has been criti-cized by authors such as O’Connor (2005). The problem of data comparability across countries exists for both, the indicators of the European Employment Strategy and the OMC in social inclusion and protection. For example, legal retirement ages, which have an effect on employment rates, differ across member states; education systems differ which affects the age of young people entering the labour market; it is very difficult to measure disability in a comparable way; and the comparability of income data of the European Household Panel has been questioned (Atkinson, 2004: 62, 72). It is, in addition, questionable whether the indicator portfolios are balanced. O’Connor (2005: 351) commented on the social inclusion indicator portfolio that extra dimensions are needed to measure the multidimensional phenomenon of social exclusion. She also found that the data was not regionally disaggregated (ibid.). Regarding the European Employment Strategy the indicator portfolio is also still imbalanced. For example, the indicators focus on achieving full employment while the issue of ‘quality of work’ is not represented in the set of indicators integrated in the employment guidelines. The indicators on the ‘quality of work’ which are part of the whole portfolio of employment indicators are still very limited, focussing on the sustainability of working time and terms of contract as well as work accidents (European Commission 2006c). A further concern of common indicators is that they do not take into account national specificities in the interpretation of social problems and the existing approaches of tackling them (Kröger 2004).

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Finally, while the usage of indicators is seen as advantageous because they do not prescribe policies (if they are outcome-oriented) and therefore do not directly interfere with member states’ social policy-making, this can also be a disadvantage. Mabbett (2004: 15), for instance, has noted that a European benchmarking process in social policy could lead to a further fragmentation between European and national approaches to social policy because, in her opinion, the OMC indicators do not mobilize a new European agenda of social policy but lead to increased competition between the member states. Convergence Convergence towards targets The OMC not only aims to inform member states’ social policy so that they move towards the targets and objectives defined by the OMC. It also strives to achieve a convergence towards these targets and objectives among member states. For example, the Luxembourg Council conclusions state that it is an aim of the EES that national policy outcomes ‘converge towards jointly set, verifiable, regularly updated targets’ ‘while respecting the differences . . . between the situations of individual Member States’ (European Council 1997: para 3). Similarly, the Lisbon conclusions announce that the OMC should be a ‘means of spreading best practice and achieving greater convergence towards the main EU goals’ to ‘help Member States to progressively develop their own policies’ (European Council 2000b: para 37). Firstly one must explain why such emphasis is placed upon ‘convergence towards targets’ and not of policies. A ‘convergence towards targets’ suggests that the OMC does not aim to determine social policy-making at the member state level. The idea is that member state governments voluntarily take the OMC targets into account and are then free in choosing the policies to achieve these targets. Thereby the principle of subsidiarity is hoped to remain intact. Another reason for the focus on targets is the assumption that more similar labour market performances provide a favourable condition for the monetary union and single market (Baddeley 2002). Comparable data on most of the set OMC targets are still missing. However, I will illustrate the issue of convergence toward targets by examining the convergence of employment and unemployment rates. This example will also point at the methodological difficulties involved with this type of investigation. Convergence can be investigated by different methods. The most common types of convergence used in quantitative convergence research are

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0.6 0.5

Total Male Female Youth Older workers

0.4 0.3 0.2 0.1 05

04

20

03

20

02

20

01

20

00

20

99

20

98

19

97

19

96

19

95

19

94

19

19

19

19

93

0 92

Coefficient of variation

the so-called ␴- and ␤-convergence. ␴-convergence means that the differences regarding a certain indicator, for example the employment rate, between a set of countries or regions decrease over time. This is normally measured by the coefficient of variation.10 A decreasing coefficient of variation over time is a sign for convergence while an increase of it over time is a sign of divergence (Bouget 2003: 677). In contrast, a process is called ␤-convergence when, for example, unemployment is faster shrinking in countries with above average unemployment rates than in countries with below average unemployment rates. ␤-convergence is regarded as a necessary but not sufficient precondition for ␴-convergence (Tondl 1997: 4).11 The analysis of the convergence of employment rates in the EU-15 shows that there are considerable differences between various social groups (see Figure 6.1). The coefficient of variation of the overall employment rate is decreasing since the early 1990s. This means that, in average, employment rates get more similar in the EU-15. One can see, however, that the differences between female employment rates are much higher than male employment rates. Moreover, differences between employment rates of young people aged 15–24 and older workers aged 55–64 are considerably higher than average differences. Another interesting difference is that the development of youth and older workers’ employment rates are not as coherent as average employment rates. Dissimilarities between countries increased for both groups between 1998 and 2000 and the differences between the employment rates of older workers increased constantly between 2001 and 2005.

Year Source: Eurostat, download 31 July 2006, calculation by the author.

Figure 6.1

Coefficient of variation for employment rates

119

2.5 2 Total Youth Male Female

1.5 1 0.5

05

04

20

03

20

02

20

01

20

00

20

99

20

98

19

97

19

96

19

95

19

94

19

19

19

19

93

0 92

Coefficient of variation

Effectiveness

Year Source: Eurostat, data download 31 July 2006, calculation by the author.

Coefficient of variation

Figure 6.2

Coefficient of variation for unemployment rates

25 20 Total

15

Female 10

Male

5 0 1999

2000

2001

2002

2003

2004

Year Source: Eurostat, download 31 July 2006.

Figure 6.3

Dispersion of regional unemployment in the EU-25

A ␤-convergence test indicates that employment growth is indeed much higher in countries with lower employment rates and more limited in countries with already high employment levels. A gap test12 regarding employment rates demonstrates, however, that the positions of countries in the EU-15 is very stable: high performers remain high performers and countries that lagged behind in 1993 still lag behind in 2003, though they are now closer to those with high employment rates (cf. Büchs 2005: 136ff.). The development of the coefficient of variation of unemployment rates differs from the employment rates. The differences between average rates do not develop into a clear direction. While the development of gaps between the unemployment rates of different groups was quite similar, the differences between the rates increased and decreased several

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times since the early 1990s with a considerable increase between 2000 and 2004. Differences in regional unemployment rates (NUTS-2 level13) were more stable between 1999 and 2004 than unemployment rates at the national level. Gaps between the total regional unemployment rates remained almost unchanged, differences between male regional unemployment rates slightly increased until 2003 and gaps between female regional unemployment rates decreased throughout the whole period (data include all 25 member states). To summarize, while average employment rates and regional unemployment rates have converged slightly in recent years, unemployment rates initially converged when the EES was introduced but diverged between 2001 and 2004. Convergence of employment rates also did not occur in recent years regarding certain groups, for example older workers. These somewhat mixed results, however, remain at the level of description and they do not indicate whether or not the EES played a role for these developments. These developments can also be due to other factors such as more general economic and social trends. The measurement of convergence towards other quantitative OMC targets is very difficult from a methodological point of view because crossnationally comparable data is lacking in regard to many indicators. Convergence of domestic social policies As stated above, the EU documents on the OMC do not explicitly state that the OMC aims at a convergence of social policies across member states but only refer to outcomes towards ‘targets’ (European Council 1997: para 3) or ‘goals’ (European Council 2000b: para 37). However, the European Council did lay down that the OMC should ‘modernise’ and ‘reinforce’ the ‘European Social Model’ (European Council 2000b: 5; European Council 2000a: 15). From a ‘second-order’ perspective one can infer from this stipulation that the OMC to a certain extent also aims at a convergence of social policies because the ‘European Social Model’ does not only consist of certain policy outcomes but also of specific social policy ‘philosophies’ and approaches (Biagi 2000: 159). This section discusses whether there is evidence for converging social policies in the European Union that might be related to the OMC. Discussions concerned with ‘convergence’ of social policies but independent from the OMC literature are highly controversial and inconclusive. Scholars who believe that convergence of policies and ‘welfare regimes’ takes place tend to conceive external developments and common challenges such as globalization and population ageing as dominant forces

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to which national policies or ‘welfare regimes’ respond in similar ways and develop akin features regardless of the historical and institutional backgrounds of individual countries. On the other extreme, scholars who are critical of the ‘convergence’ hypothesis argue that national politics and institutions play a crucial role for policy development and that individual countries with different institutional and political backgrounds will therefore respond in different and path-dependent ways to these common challenges (cf. Berger 1996; Scharpf 2000; Ebbinghaus and Manow 2001; Hall and Soskice 2001). Moreover, assessments of convergence often depend on what is analysed and what aspects of development are emphasized. Proponents of convergence often use quantitative indicators such as expenditure data or look at more general policy developments (e.g. Greve 1996; e.g. Chapon and Euzéby 2002; Cornelisse and Goudswaard 2002; Rothgang et al. 2006); other scholars examine similarities of groups or ‘families’ of states (e.g. Esping-Andersen 1990; e.g. Castles and Mitchell 1993) or find that the outcomes of convergence research very much depend on the variables which are used (Castles 2004). Opponents of the convergence thesis emphasize the uniqueness of national policy approaches (e.g. Daly 1997). However, several authors prefer to argue that convergence and non-convergence can occur simultaneously, for instance through a general trend towards common policy approaches which is accompanied by path-dependent and country-specific concrete policy designs (e.g. Sykes 1998; Daguerre and Taylor-Gooby 2003; Erhel and Zajdela 2004; Clasen 2005; e.g. Bruttel and Sol 2006). The literature on the question of whether or not the OMC leads to a convergence of social policies in all member states is as inconclusive as the literature on convergence in general. Reports of the European Commission and Council rather emphasize common developments. The most recent Joint Employment Report (Council of the European Union 2006a) and the Joint Report for Social Protection and Social Inclusion (Council of the European Union 2006b) state, for instance, that a majority of the member states pursued policy reforms coherent with the OMC objectives in several areas. They report that regarding employment policies, most member states focussed on policies aimed at increasing employment rates (Council of the European Union 2006a: 3, 6). Many member states concentrate on strengthening the incentives to take up work and increase in-work benefits. They also make efforts to better coordinate or merge public employment services, social security authorities and unemployment benefit

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organizations (ibid.: 12). Employment services are increasingly linked to social assistance at the regional or local level (Council of the European Union 2006b: 4). In order to increase employment rates, member states are also keen to decrease non-wage labour costs, particularly for lowpaid jobs (Council of the European Union 2006a: 14). The real unit labour costs are declining in most member states. The development of non-wage labour costs was more incoherent since they were decreasing in some member states but increasing in others (ibid).14 According to the reports, member states also acknowledge the importance of education and skills for a better match between labour supply and demand and for increasing productivity (ibid: 8) and overall spending in human resources as a percentage of the gross domestic product has increased from 4.17 per cent in 2000 to 5.22 per cent in 2003 in the EU-25 (Eurostat, 3 July 2006). There are also similar developments in the area of social protection and social inclusion. All member states seem to accept the approach that the inclusion into the labour market is the best way out of poverty. Efforts to boost employment rates, to increase incentives to take up work, to coordinate employment and social assistance services and to target policies to some disadvantaged groups on the labour market are therefore not only a new trend in labour market policy but also in the fight against poverty (Council of the European Union 2006b: 4). This trend has an effect on social security systems and many member states undertake reforms of benefit regimes to decrease ‘disincentives’ to take up work related to benefit regimes. In recent years early retirement provisions and invalidity benefits were reviewed in order to create incentives for individuals to remain in the labour market longer (ibid.). The aim to provide for sustainable and accessible social security systems as well as for adequate benefit levels was also accepted by the member states. At the same time, efforts to achieve balanced budgets and to reduce public debts were an issue in many member states underpinned by the Stability and Growth Pact. However, not all member states are successful in achieving these fiscal policy goals (Council of the European Union 2006b: 11). Many member states focus on the provision of supplementary pension schemes and increase the level of guaranteed means-tested minimum pensions (ibid: 12). Reforms in recent years have led to a decreasing replacement rate of public pension schemes (ibid). Many member states also aim to provide equal access to health and long term care services (Commission of the European Communities 2005a: 6f.). Overall, there is a trend to decentralize responsibility in deciding and delivering social policies (Council of the European Union 2006b: 6).

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However, the Joint Report on social inclusion of 2005 acknowledged that the approaches adopted in the member states to fight poverty and social exclusion differed widely depending on their starting positions, welfare regime and experience of developing anti-poverty strategies (Commission of the European Communities 2005a: 7). From an academic point of view it is however unclear which role the OMC has played in promoting and supporting these developments. Even if one acknowledges that ideas and general orientations in social policies moved closer towards a common model during the last couple of years it is still difficult to identify the role the OMC has played in this development. On the one hand the OMC has probably contributed to disseminating similar ideas on social policy such as ‘activation’, ‘employability’, ‘prevention’, ‘flexicurity’, work as a route out of poverty, work incentives, sustainability and equal access to social protection systems. As a result we can conclude that the OMC has played a role for increasingly similar presentations and justifications of social policy changes which has been demonstrated in detail by analysing the usage of the OMC in Germany in Chapter 5. On the other hand, the OMC is not the only reason for this development but the OMC itself is embedded in the politics of the monetary union and the internal market. This economic policy framework, to which member states have to comply since most aspects of it are legally binding, also supports the move towards supply-side oriented labour market policies, the strive for increasing employment rates and work incentives as well as cost-efficient social security systems. In conclusion, many OMC scholars argue that the OMC contributed to the dissemination and ‘diffusion’ of a certain vocabulary and therefore a move towards increasingly similar justification of policies while policies remain distinct at the level of detailed programme analysis (e.g. Tucker 2003; Wincott 2003; Jacobsson 2004b; e.g. Barbier 2005; Zeitlin 2005b: 450ff.). Taking into account the non-bindingness of the OMC it is rather unlikely that the OMC is more than an additional catalyst in already planned responses to common external challenges which still take place in a path-dependent way. In other words, the OMC might additionally contribute to a convergence of general policy orientations but it does certainly not lead to a convergence of more specific features in social policy programmes across the EU.

Balancing ‘positive’ and ‘negative’ integration The question whether the OMC contributed to balancing ‘positive’ and ‘negative integration’ is posed from a second-order perspective because

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EU documents do not contain explicit statements regarding this issue. Several OMC documents state that this method seeks to ‘strengthen social Europe’. However, does this imply the goal of rendering economic and social policy objectives equally important at the EU level? For example, the Luxembourg conclusions state that the European employment strategy is part of a new strategy that strives at . . . harnessing in a more systematic, more deliberate way than hitherto of all Community policies in support of employment, both framework policies and support policies. All such policies must be implemented in accordance with the principles of the Treaty and must help unleash the potential for dynamism and enterprise to be found in Europe’s economy (European Council 1997: para 6). From this quote it is unclear whether the employment goals should merely be strengthened in relation to economic goals or whether they should be treated as equally important. One interpretation is that the goal of raising employment levels is now on par with the EU’s economic goals because all policies should be streamlined to achieve high employment levels. On the other hand, according to the Council, increasing employment levels should also cohere with other EU goals and lead to economic success. This therefore suggests that high employment rates are seen as a way to achieve economic success and that the latter is still prioritized over high employment levels. This tension is also evident in the Lisbon Council conclusions. In this document, the announcement of the new EU objective ‘to become the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion’ (European Council 2000b: para. 5) contains both economic and social goals. However, it is not clearly expressed whether these objectives are now equally important or whether the social policy goals are subordinated beneath economic objectives in the drive to ensure that the EU becomes the most successful economy in the world. This ambivalence is also mirrored in scholars’ interpretations of the OMC. Some authors do not explicitly discuss whether or not the OMC has set social and economic goals on an equal footing but assume that the OMC will strengthen ‘social Europe’. For example, De la Porte and Pochet state in the introduction to their edited volume focussing on the OMC that ‘the decision was taken [at the Lisbon council, M.B.] to strengthen the social dimension of Europe, primarily to be affected through the soft policy route’ (De la Porte and Pochet 2002b: 11; similarly: Daly

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2006). However other authors, such as Ferrera and Rhodes, believe that the OMC is able to set economic and social objectives on an equal footing: The European Union, acting as a ‘semi-sovereign’ policy system, seems slowly but surely to be carving out a distinct ‘policy space’ regarding social policy – a space which may gradually work to rebalance ‘softly’ and ‘from below’ the current structural asymmetry between negative and positive integration (Ferrera and Rhodes 2000: 278, emphasis M.B.). The existence of these different interpretations indicates that the concept of ‘balancing social and economic policy objectives’ at the EU level is not explicitly identified as goal of the OMC. Nonetheless, this goal played a significant role in academic discussions surrounding the OMC and a ‘second-order’ evaluation should therefore examine whether the OMC can contribute to it. This final section discusses whether the OMC has a potential to change the relationship between economic and social policy goals of the EU even though the OMC is based on non-binding and sanction-less policy instruments (in contrast to ‘negative integration’ law and rules on the European Monetary Union and the Stability and Growth Pact). It also considers whether the ‘third way’ approach on which the OMC rests is a suitable approach for this aim. In addressing the first aspect one has to take into account that the social policy OMC has not changed the current interpretation of competency questions between the EU and the member states in the field of social policy. The social policy competencies of the EU remain constrained through the strict application of the subsidiarity principle and further limitations provided by the Treaty of the European Communities (see chapter 1). It has been predicted that this situation will not change through the inclusion of the social policy OMC into the constitutional treaty of the EU: ‘We cannot believe that the traces of OMC one finds in the Draft Constitutional Treaty will bridge between economic and the social constitution of Europe’ (Joerges and Rödl 2004: 24). What the convention promises according to Joerges and Rödl is a ‘step sideways rather than forward’ (ibid.). Taking into account both the non-binding nature of the OMCs and the fact that they are embedded in a framework of legally binding ‘negative integration’ and rules of the Stability and Growth Pact, the imbalance between ‘negative’ and ‘positive integration’ has not been altered in terms of legal provisions. Regarding ‘real effects’, a change in this imbalance could only be brought about if the social policy OMC had a

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similar impact at the Member State level like EU law which is connected to the single market or the rules of the European Monetary Union and the Stability and Growth Pact.15 Several authors, e.g. De la Porte and Pochet (2002c: 51), Ball (2001: 360) and Larsen and Taylor-Gooby (2004: 203) suggested that there is a hierarchy of different strands of EU policy coordination. They stated that the Stability and Growth Pact stands at the top of this hierarchy because it is the most binding and potentially influential instrument, followed by economic policy coordination,16 then by the EES and finally by the OMCs in other social areas which are the softest and potentially least influential strand of the OMC. This hypothesis is confirmed by the results of this study. The subordination of the social policy OMC is firstly due to the internal design of the OMC. The social policy OMCs are required to be compatible with the Lisbon Strategy. Since the Lisbon Strategy has been reorganized in 2005 its aims of economic growth and better jobs are clearly prioritized over its social policy goals. In addition, the economic policy coordination and the EES have been united to one strategy with a common set of guidelines. This sets the economic/employment branch of the Lisbon Strategy into opposition to the social policy OMC. The social policy OMC is also disadvantaged against the economic and employment OMC because its objectives and quantitative indicators are not adopted by the Council of the European Union. Its objectives are based on a Commission recommendation which has been informally endorsed by the European Council who does not have the power to adopt policies. In addition, the subordination of the social policy OMC beneath the Stability and Growth Pact becomes apparent in comparing how these two programmes are ‘used’ in national policy-making. The rules of the Stability and Growth Pact are taken much more seriously in the public debate than the EES (Meyer 2005) and the argument that the state deficit and budget policy have to be in accordance with these rules plays an important role in the social and labour market policy discourse. Since the OMC is not binding, it does not provide a resource to promote changes which are in conflict with the Stability and Growth Pact. It has also been argued that the social policy OMCs have actually been instrumentalized for economic reform: It was becoming clear that the “equilateral triangle between economic policy, employment and social policy” which, rightly, had been upheld by the Employment and Social Affairs Commissioner, was becoming skewed in favour of economic reform (Wilkinson 2001).

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Overall, one can therefore argue, it is still the case that member state governments are restricted in the range of policies pursued at the member state level through the rules of ‘negative integration’. The OMCs do not provide a counterweight to these restrictions (cf. also Ashiagbor 2005: 188f.). The second aspect considered in this section concerns the role of the ‘third way’ approach on which the OMC is based. The ‘third way’ promises to reconcile economic efficiency and social justice. Therefore, many scholars assume that it can be a suitable approach for bringing economic and social policy objectives into balance and that this does not only apply to individual countries but that it should be a model for the whole European Union (Ferrera and Rhodes 2000; Giddens 2001: 14; Vandenbroucke 2002). This hope is based on the idea that the inclusion into labour markets is the best way to tackle poverty and social inequality while it is not detrimental to economic growth and efficiency. In order to assess this claim it is worth discussing the critical comments on this approach brought forward in the literature. While the integration into the labour market certainly is an important aspect of social policies in societies where paid work is the main source of income and social inclusion, this approach also has some disadvantages when unemployment is high and affected by the macro-economic context as well. The ‘third way’ agenda has therefore been criticized for its underlying interpretation of the causes of unemployment and the effects it has for the people who are to be integrated into the labour market. Instead of structural reasons, the ‘third way’ assumes that the lack of employability and adaptability of the jobseeker are the main reason for unemployment. Therefore, the obligations of the individual are stressed which gives the ‘third way’ agenda a ‘social authoritarian’ flavour (Driver and Martell 1998). This strategy therefore poses the danger that the jobseekers’ and workers’ ‘responsibilities’ can turn into an undue burden which is not balanced by complementary rights of jobseekers and workers – particularly on the backdrop of high unemployment and slow employment growth (Peck and Theodore 2000). In addition, if unemployment is high it is difficult to create jobs which are equivalent to already existing full-time quality jobs. The ‘third way’ approach therefore also risks to provide low-quality and insecure jobs for those individuals who are already inadequately integrated into the labour market. This would not reduce poverty and it would contribute to increasing labour market segregation and therefore change little in terms of combating poverty and social inequality (Chapon and Euzéby 2002: 49).

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Furthermore it is not clear whether economic growth always translates into employment growth and subsequently into a reduction of poverty. According to the European Commission, several member states (Greece, Germany, Sweden) reported that economic growth has not been sufficiently converted into employment growth. It also states that poverty rates remain very high in Ireland and Spain despite of considerable economic growth in these countries (Commission of the European Communities 2006: 13). In more general terms, the ‘third way’ has been criticized for providing an insufficient basis to achieve social equality. Plant (1998) has argued, for example, that the ‘third way’ restricts the meaning of citizenship and converts it into a ‘supply side citizenship’ because it only guarantees the right to offer one’s work-capacity on the labour market but not a right to a minimum income, for example (similary: Dean 2004). Moreover, Taylor-Gooby (2001) stated that the ‘third way’ is based on ‘risk society’ theory (Beck 1992; Beck, Giddens et al. 1994) and that this theory assumes value consensus and a similar distribution of risks in society. Risk society theory also maintains that all individuals become increasingly aware of the possible risks entailed by state intervention and therefore agree to a minimization of state intervention and to take over more self-responsibility. This theoretical assumption is then the basis for social policies which reduce state intervention and shift the responsibilities for well-being and social equality back to civil society and the individual. Taylor-Gooby criticizes this approach on the basis of the assumption that social risks are unevenly distributed in society and that ‘risk society’ theory is actually an ideology which favours the powerful in society (Taylor-Gooby 2001). With specific regard to the OMC one can also argue that the ‘third way’-based OMCs cannot outweigh the effects of ‘negative integration’ of the EU. This claim rests on the argument that the ‘third way’ does not aim at correcting markets or at de-commodification and that it does not formulate political goals in conflict with the Stability and Growth Pact or the single-market agenda. The latter provision is guaranteed by the requirement that the social policy OMC has to reinforce the Lisbon agenda and economic policy coordination (Art. 126.1 Treaty of the European Communities, European Council 2006). Indeed, the ‘third way’ is a strategy defining social policy objectives as a function of markets. A trade-off between economic and social objectives in market economies is denied as is the political conflict of combining these two aspects. The denial of this conflict and the related power asymmetries between economic and social interests eventually privileges market efficiency over

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social equality. The recent trends of increasing social inequality and poverty in Europe support this theoretical argument as well as the sceptical view that an OMC which is based on a ‘third way’ concept will not contribute to bringing economic and social policy goals of European integration into balance. To briefly summarize, this chapter found that the OMC has promoted a new ‘third way’ discourse on social and labour market policies which is distinct from, for example, the American social policy approach. The analysis of policy developments across Europe demonstrates that most member states accept the language and broad concepts on which the OMC is based and increasingly present their policies according to this framework. However, goal achievement of the OMC looks less promising. Most of the European Employment Strategy’s targets for 2005 have not been achieved and it seems unlikely that the targets for 2010 can be met in time. Also the goal of the OMC inclusion to reduce poverty and strengthen social cohesion has not been achieved since poverty rates and social inequality have risen towards the end of the period examined in this study. The convergence towards targets, exemplified by using employment and unemployment rates, seems to be slow and limited because it does not equally apply to all social groups. Convergence of concrete social policy programmes is also restricted because the differences in social policy approaches, institutions and actor constellations between member states still play a role for the course of social policy development. Although policy actors in some member states use the OMC to justify policy reforms, the OMC is very likely only an additional catalyst for ongoing policy developments and the convergence of broader policy approaches. One reason for this is that the social policy OMC is subordinated to the Stability and Growth Pact and the Lisbon Strategy which concentrates on economic and employment growth. This overall architecture of the OMC also inhibits that the social and economic goals of the European Union are brought into balance. The following chapter will demonstrate that an insufficiently effective OMC can be both, an advantage and an impediment of the OMC’s legitimacy.

7 Legitimacy

The Open Method of Coordination (OMC) is a new governance method in EU social policy and involves a particular way of political steering. Therefore an evaluation of the OMC should not only address the OMC’s potential of achieving its social policy objectives and ‘strengthening social Europe’ but also its democratic quality and legitimacy. The EU claims that the OMC is legitimate because it is coherent with the principle of subsidiarity. The OMC also aims to enhance the democratic quality of EU policy-making processes through encouraging the participation of non-governmental and regional actors. The OMC’s legitimacy and democratic quality is not only discussed in EU documents but these aspects have also been an important issue in the academic OMC literature (e.g. De la Porte and Nanz 2004; Eberlein and Kerwer 2004; Smismans 2005; Zeitlin 2005b). This chapter evaluates the OMC’s democratic quality and legitimacy. Firstly it discusses from a ‘first-order’ perspective (see introduction to Chapter 6) whether the goal to widen participation by ‘civil society’ and regional actors has been achieved. Subsequently the chapter examines from a ‘second order’ perspective the transparency of OMC processes, accountability in the OMC as well as the question of whether or not ‘directly-deliberate democracy’ has the potential to provide a new blueprint for an EU democracy model as it is claimed by authors such as Zeitlin (2003), Cohen and Sabel (1997 and 2003), Sabel and Zeitlin (2003), Gerstenberg and Sabel (2002) and Eberlein and Kerwer (2004). The second part of the chapter is concerned with the OMC’s legitimacy. From a firstorder perspective two questions need to be discussed: is the OMC coherent with the Treaty of the European Communities and does the OMC respect the principle of subsidiarity as it is claimed by the EU Commission and the Council? Finally the chapter addresses two questions from a ‘second-order’ perspective. One relates to the assumption that the OMC 130

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is required to have an impact on national policy-making if its aims are to be achieved. The legitimacy of this ‘soft’ OMC influence needs to be discussed. Moreover, some authors in the OMC literature expressed the hope that the OMC can increase the overall legitimacy of the EU through output-legitimacy (Telò 2003). The chapter closes with an examination of this question.

Democratic quality of OMC processes Participation in the OMC The main democracy-related goal of the OMC is to increase the participation of a range of policy actors in OMC processes at the national and European level. This goal is stated in many OMC documents and it is therefore evaluated from a ‘first-order’ perspective. The Lisbon Council conclusions state, for example, that the OMC processes should ‘actively involve’ ‘the Union, the Member States, the regional and local levels, as well as the social partners and civil society . . . , using variable forms of partnership’ (European Council 2000b: para. 38). Since 2000, participation has become an overarching goal in the various OMCs (European Council 2000b: para. 38; Council of the European Union 2005a; European Council 2006). According to the EU Commission’s White Paper on Governance, the participation of a broad range of actors will not only help to improve the democratic quality of the OMC processes but also EU policy-making procedures more generally (Commission of the European Communities 2001d: 10ff.). In seeking to analyse the actual degree and type of participation in various OMC processes, one has to ask whether and which rules are provided by the various OMCs for participation of different actors. One of the new objectives in the OMC social inclusion and social protection, for example, calls for ‘good governance, transparency and the involvement of stakeholders in the design, implementation and monitoring of policy’ (European Council 2006). The guidelines of the European Employment Strategy state that in taking action, Member States should ensure good governance of employment policies. They should establish a broad partnership for change by involving parliamentary bodies and stakeholders, including those at regional and local levels. European and national social partners should play a central role (Council of the European Union 2005a: 23).

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These rules remain, however, relatively broad and it is not clear in which phases of policy-making and in which ways these ‘stakeholders’ should be involved. Another issue for evaluation is which actors are participating in OMC processes and what their role in these processes is. Here I will discuss the role of parliaments, the social partners and NGOs. Academics and the EU Parliament itself have criticized the role of the European and national parliaments in OMC processes. The latter have suggested that OMC processes need to be more clearly defined at the EU level and that the role currently designated in EU procedures for parliaments is insufficient (European Parliament 2002: para. 16; Council of the European Union 2006a: 9). Several studies find that the role of national parliaments and the EU Parliament in the OMC is only marginal and that the whole OMC is a form of ‘executive federalism’ (Duina and Raunio 2006: 3). In the European Employment Strategy, the EU Parliament only has the right to be consulted about the process (according to Art. 128 Treaty of the European Communities); in the other social policy OMCs no rules regarding the EU Parliament are codified. The guidelines of the European Employment Strategy recommend to member states to ‘involve parliamentary bodies and stakeholders’ (Council of the European Union 2005a: 23) and also the Commission proposal on the common objectives for the OMC in social inclusion and social protection suggests that the Commission and member states should consult with parliaments about ways in which they could be more fully involved (Commission of the European Communities 2005b: 9). Almost all empirical studies conclude that member state governments do not consult their parliaments in the drawing-up process of the National Action Plans but only send the plans to them for information. Often, the National Action Plans are not widely discussed in National parliaments (De la Porte and Pochet 2005: 359f., 375). While Duina and Raunio also see positive aspects of the OMC for national parliaments, for example the access to comparative information and therefore broader sources to criticize the policy course of their governments, their conclusion on the negative aspects of the OMC for parliaments seems to be more important: Cooperative [or executive, M.B.] federalism removes decision-making processes away from the public sphere and into intergovernmental meetings that take place behind closed doors. It weakens the transparency of collective decision-making and, consequently, the accountability of the representatives. Cooperative federalism by design thus

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emphasises output legitimacy at the expense of transparency and parliamentary accountability. The OMC can be said to have done all of this (Duina and Raunio 2006: 14). These authors and other academics have consequently called for a closer involvement of parliaments into the OMC. Several studies have also examined the actual participation of ‘social partners’ and NGOs in OMC processes at the EU and national level (including the preparation of NAPs). With regard to the OMC, actual participation of the ‘social partners’, NGOs and regions is regarded as insufficient (Foden 1999; Winterton and Foden 2001; Radaelli 2003b: 49; De la Porte and Nanz 2004; Casey 2005a; De la Porte and Pochet 2005; Friedrich 2006; Idema and Kelemen n.d.: 14). Even the most recent Joint Employment Report of the Council and Commission emphasized that the role of the social partners remains limited and that the new National Reform Programmes ‘generally remain government documents’ (Council of the European Union 2006a: 9). Also the 2005 Joint Report on Social Inclusion and Social Protection calls for a wider involvement of all stakeholders (Commission of the European Communities 2005a: 7f., 11). In addition, participation of the NGOs at the EU level concentrates on a few social policy ‘networks’.1 Some authors, for example Zeitlin (2005b), reported that OMC inclusion processes are increasingly inviting NGO participation at the member state level – however, no criteria exist that identify which organizations qualify for participation and what the exact role of these organizations should be. Furthermore, participation is perceived as uneven between the different OMCs: in the European Employment Strategy, for instance, participation concentrates on the ‘social partners’. In the OMC inclusion, participation of different NGOs is more important than in the EES. This is because these actors play different roles in employment, social inclusion or pension policies and it does therefore not necessarily pose a legitimacy problem. To summarize, the OMC aims at a wide participation of a broad range of stakeholders. Clear rules regarding which actors should be involved in which stages of policy-making, what roles they are allowed to play and what responsibilities they carry have, however, not been established. Those commentators who are in favour of wide ‘civil society’ participation bemoan that participation of social partners and NGOs is still insufficient. Another problematic aspect in the participation debate of the OMC has been the weak role of the European and national parliaments in OMC processes. However, an evaluation of the OMC’s legitimacy does not only need to discuss whether ‘civil society’ participation has become extended

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but also whether this would contribute to an enhanced democratic quality of the OMC. This question will be addressed below (see pp. 138ff.). Transparency and accountability Although transparency is mentioned as a goal of the OMC while accountability is not, both criteria will be discussed together in this section.2 It is important to address both aspects because they are two interrelated key criteria for the democratic quality of political processes. In parliamentary democracies citizens can only take an informed decision in elections if they are fully aware of the initiatives proposed and adopted by policymakers. Public debate and deliberation about policies is only possible if all citizens, NGOs, social partners, national, regional and local governments have access to information on the decisions at stake. Democratic accountability means that the electorate can hold politicians accountable for their decisions. For this to happen electoral mechanisms need to be in place by which the electorate can punish or reward politicians in office for their decisions or non-decisions. These mechanisms include a clear distribution of competencies and responsibilities, the exposure of those responsible for decision-making to democratic elections, and full information about decision-making processes. Transparency is therefore a necessary but not sufficient precondition for accountability (Bovens 2006). Several scholars have criticized the state of transparency in the current design of the OMC (Berghman and Okma 2002; Zeitlin 2005b: 460). Though it is the case that almost all important documents related to the OMC are available on the EU websites, some crucial decision-making processes remain opaque. The OMC decision-making processes are very complex and it is not clear to the citizens which actors play what role in the process. Collaboration in policy networks – comprising representatives of national governments, national and European social partners, national and European NGOs, representatives of European institutions such as the Commission as well as experts – leave it unclear which actors mainly shape the European agenda and to which degree this network influences decision-making at the national level. This also applies to one of the most important OMC decision-making processes concerning the quantitative indicators and targets. These targets are agreed by the Employment Committee and the Social Protection Committee which consist of two representatives from each member state and two representatives from the European Commission. Although both Committees are represented on the Commission’s website3 including some of their reports and ‘opinions’, many of the important documents of their decision-making processes are not available to the public.

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These committees are also allowed to invite experts and interest groups. No criteria exist regarding the involvement of these actors (Zeitlin 2005b: 460) and the public is not informed about which other actors have been invited to the sessions and what role they played in the decision-making process. Therefore even Zeitlin who is a relatively optimistic OMC scholar concluded that ‘the deliberations of these committees take place behind closed doors and remain far from transparent’ (Zeitlin 2005b: 460).4 In addition, the OMC decision-making processes do not receive much attention from the media (Meyer 2005) or from policy actors other than those directly involved in the drawing-up of the National Action Plans. This renders the course of policy-making processes and linkages between the EU and the national level even more opaque to EU citizens ( Joerges 2004: 31). Due to this lack of transparency and clear responsibility between national, European and non-governmental policy actors, the accountability of national governments is also affected by the OMC procedures. Government accountability is weakened because it is neither apparent to the public and electorates why, whether, and how a government has been influenced by OMC processes nor which consequences they might have for domestic, social, and labour market policy. In addition, many actors who participate in OMC decision-making processes are not accountable to national electorates. Overall, the OMC therefore poses problems in terms of lack of transparency and accountability. Directly-deliberative democracy Another issue which is related to the democratic quality of the OMC has been discussed in the OMC literature and therefore belongs to a secondorder perspective. This issue concerns the model of ‘directly-deliberative democracy’. Scholars such as Cohen and Sabel (1997), Gerstenberg and Sabel (2002), Zeitlin (2003), and Eberlein and Kerwer (2004) see the OMC as a potential model for a ‘directly-deliberative democracy’ and therefore as a new model of democracy for the EU as such. In a ‘directly-deliberative democracy’ political decision-making is devolved to the local level. The central level only has the responsibility to provide the facilities for local decision-making, and to monitor and benchmark the policy outcomes of the local units (Cohen and Sabel 1997; Dorf and Sabel 1998; Cohen and Sabel 2003). Two questions are related to the discussion about ‘directly-deliberative democracy’, firstly, to which degree the OMC already exhibits characteristics of ‘directly-deliberative democracy’ and, secondly the normative question of how one should judge upon the

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model of ‘directly- deliberative democracy’ and the prospect that the OMC could embody this model. Several authors in this debate have already stated that the OMC does not yet live up to the principles of directly-deliberative democracy (Gerstenberg and Sabel 2002; Smismans 2005). This criticism has been formulated from different points of view: Smismans finds that the OMC is not yet decentralized enough to fulfil these criteria (Smismans 2004) while Cohen and Sabel are sceptical as to whether deliberation and participation are wide enough to live up to the ideal of directly-deliberative democracy. In addition, the process of reviewing the OMC is not constitutionalized which would be required by the model of directly-deliberative democracy. Zeitlin’s suggestions to reflexively apply the OMC principles to the OMC procedures themselves in order to monitor them can, however, be seen as a proposal to build such a framework (Zeitlin 2005b). Moreover, the underlying democracy concept that praises wide and direct participation in OMC processes as enhancing democratic legitimacy of the EU can be challenged. The model of directly-deliberative democracy (Cohen and Sabel 1997; Dorf and Sabel 1998) certainly starts from considerations about important current problems to which democracy theory and institution building have to respond. These issues comprise the steering capacity of law and the relationship between legitimacy and effectiveness as well as between unitary rules, diversity and flexibility. However, several aspects of this model remain questionable from normative and empirical points of view. The aspects that are highlighted in the following considerations are: the application of private sector principles to the public sector; the re-defined role of law, the legislature and courts; the (mis-)interpretation of the role of power-relationships and diversity for direct deliberation; and possible consequences of localism for social inequality on the backdrop of economic integration. Firstly, the model of directly-deliberative democracy starts from theoretical assumptions about post-modern and flexible capitalism and advocates an application of private production principles of late capitalism such as decentralization, benchmarking, and management by objectives to the public sector (Cohen and Sabel 1997; Gerstenberg and Sabel 2002). It is, however, not clear whether these principles are appropriate for an application to the public sector, where action is directed at the realization of ‘common goods’ instead of private profits (Joerges 2004: 29f.; Scheuermann 2004: 101–7). The second point of scepticism relates to the newly defined role of law, legislation and courts in the directly-deliberative democracy model. The directly-deliberative democracy approach is deeply sceptical of unitary

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legal rules, arguing that society has become so diverse, dynamic, and complex that the application of unitary rules is doomed to fail and therefore ineffective. Another argument used by Gerstenberg and Sabel states that language can never be clearly interpreted, such that there will never be legal determinacy, clarity, and stability. Therefore, the production of precise legal rules is a waste of resources and these rules can and should instead be broad and vague, leaving considerable room for interpretation, in particular by local experimentation units where the functions of the legislature and the executive are united. Courts should refrain from taking definite and clearly substantive decisions in order to resolve conflicts. Their role should instead be restricted to monitoring the deliberation processes in local units and ensuring that ‘real’ deliberation takes place there. Legislatures should delegate the right to decisionmaking to local units, though this ‘does not of course preclude national solutions through legislative enactment when uniform solutions are preferable’ (Cohen and Sabel 1997: 334). What is however lacking is a clarification of criteria when unitary solutions are needed, and of how the misuse of power by local unit actors could be prevented and sanctioned when the role of the legislature and courts changes in the way imagined. In addition, the classical principle of separation of powers is relaxed in this approach, as it is in the OMC practice: a broad range of actors, who may also be responsible for the implementation of rules, shall participate in rule-making at various levels. This has been described by Scott and Trubek as follows: A traditional conception of law appears to rest upon a clear distinction between rule making on the one hand, and rule application and implementation on the other. New governance [for which the OMC is an example, M.B.], on the contrary, accepts that this distinction must break down as indeterminate and flexible rules are adapted to meet new challenges and resolve unexpected problems (Scott and Trubek 2002: 8). Further, since local unit actors are required to interpret and apply constitutional rules according to local circumstances, these constitutional principles including subjective rights may be realized in divergent ways from local unit to local unit. Thus, the question arises as to how legal equality (Rechtsgleichheit) and legal security (Rechtssicherheit) can be guaranteed in such a setting. Some authors regard these new approaches to the role of law, the courts, legislatures, and executives as well as a new

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understanding of the distribution and partial emulsion of powers between these institutions as threatening the principle of rule of law: Democratic experimentalism asks us to take the traditional virtues of the rule of law lightly. It asks us to loosen the ties between law and enforcement, and, instead, to trust that our societies will manage with much less governmental powers. . . . It [the OMC, M.B.] risks empowering the executive and removing the virtues of democratic accountability, of rule-bound public governance and its judicial control (Joerges 2004: 31). In particular, the “Open Method of Coordination” threatens the very idea of constitutionalism, namely, the idea of law mediated, and rule-of-law-bound governance (ibid.: 7f., cf. also Scheuermann 2004). This leads to problems, in particular if one assumes that powerasymmetries exist among these actors who are then making and applying rules. The third point of criticism is, namely, related to the belief that direct participation of diverse social actors in local and experimental policymaking has a legitimacy-enhancing function. First, criteria such as transparency and participation are only two criteria for evaluating democratic quality. However, there are more criteria which are important to be considered, for example, representativeness and of powers.5 The idea behind participation as a function that increases legitimacy is that actors participating in policy-making processes are more likely to accept the outcomes of the decision-making process and, thereby, to render policies more effective. If participation is used as a criterion in such a simplistic manner and if some other important points are not considered, the participation argument becomes problematic. The call for more participation often comes from a rather pragmatic angle in the sense that policies are hoped to be more likely implemented, and therefore, more effective if a broader range of actors were to participate in the decision-making process.6 As correct as this argument might be empirically, this has little to do with democracy as long as no clear criteria exist regarding the question of which actors are allowed and able to participate, who decides these questions, and which powers these actors should have. The degree of participation may range from information, to consultation, to ‘real’ decision-making entitlements. It is crucial to have clear criteria for this kind of participation with a view to the greatest transparency regarding the influence of certain actors on processes. Further, if the aim of policy-makers is to ensure better implementation of policies, there is a high likelihood that participation

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is organized unevenly and asymmetrically in order to leave broader room for influence by actors playing a key role in the implementation process. The subsequent danger is that third parties, who do not take part in implementation directly but are nevertheless affected by the policies, do not have a say in policy-making. In addition, direct participation of actors in decision-making processes, who, later, have to implement policies may violate the principle of separation of powers. The directly-deliberative democracy model begins with the assumption that diversity among participants’ interests and perspectives is a precondition for developing viable political solutions through ‘direct deliberation’ because mutual learning proceeds best if diverse points of view exist and are exchanged. It is furthermore assumed that these diverse actors are related through interdependency (mainly regarding the implementation of collective decisions) such that no single actor can impose his or her interests on others: ‘in a complex world, ‘strong’ actors cannot rule out the possibility that they will come to depend on solutions discovered by ‘weak’ ones’ (Gerstenberg and Sabel 2002: 293). It is, of course, no question that diversity of opinions and interests positively influences the results of decision-making. Indeed, democracy theory mainly deals with the question of how the diversity of perspectives and interests can be represented and how the different interests can influence policy-making processes in a just manner. In my view, however, the directly-deliberative democracy model is too optimistic about the power-relationships in ‘complex societies’. This model appears to take for granted that diverse social actors have the same access to these deliberative arenas and have the same influence on policy-making due to the interdependency between the participating actors. This is an unrealistic picture of real relationships between social actors, organizational and informational resources, and the role of affected third parties (whose interests may be difficult to organize). It makes the idea of undercutting classical divisions of powers (legislation, executive and judicial) in local deliberative arenas immensely dubious, in particular, when the role of constitutional law, to which political institutions are bound, is redefined as it is in the directly-deliberative democracy model. A more demanding model of democratic legitimacy would, instead, have to apply the criteria that political institutions are designed such that social power-asymmetries are balanced and political decisions do not favour the interests of the more powerful actors. Finally, possible consequences of localism for social inequality on the backdrop of economic integration must be considered. When economic integration increases, the countries or regions concerned with the

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integration are affected by higher competition pressure. This may trigger the fear that certain collective goods such as social security or environmental protection become reduced, as high standards can be interpreted as an economic disadvantage by economic actors. To prevent such a development, a unitary framework of rules and standards may be necessary instead of local and weakly coordinated adjustment to these circumstances. Another danger is connected to a political model that does not provide common standards and rules for collective goods which are important for the vitality of political units but difficult to guarantee: inequality between local units might increase thus eroding the very preconditions for equal direct participation and deliberation in decision-making.7 Although academics such as Sabel, Cohen, and Dorf mention this potential critique, they do not regard it as a serious challenge to their model, assuming that a directly-deliberative polyarchy will lead to equally prospering communities (Cohen and Sabel 1997: 337; Dorf and Sabel 1998: 404ff.). In summary, while the directly-deliberative democracy concept, which serves as a basis for legitimacy models of the OMC, certainly responded to current theoretical and practical problems of democracy, its conclusions and proposals for institution building remain questionable. Therefore, it is also dubious whether the OMC-processes could feature a high democratic quality if they were fully based on the model of directly-deliberative democracy. Even more so it does not seem appropriate that the OMC and any models of directly-deliberative democracy coupled to it serve as a democracy model for the whole EU. This would abolish the European model of representative and parliamentary democracy.

Legitimacy of the OMC The sheer existence of the OMC and claims regarding its democratic quality are not yet a guarantee for the legitimacy of this governance method. The legitimacy of the OMC therefore requires a separate evaluation, both from a ‘first-’ and a ‘second-order’ perspective. The EU presents the OMC as a legitimate governance method which is coherent with the Treaty of the European Communities and with the principle of subsidiarity. For example, the council conclusions emphasize that the application of the OMC should fully respect the diversity between member states and the principle of subsidiarity (European Council 1997: para. 13, 14; European Council 2000b: para. 38). These issues will therefore be discussed from a ‘first-order’ perspective. The EU’s emphasis on the coherence of the OMC with the principle of subsidiarity implies that the OMC is not designed to change the share of

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responsibilities between member states and the EU in the area of social policy. From this follows an interesting point for a ‘second-order’ evaluation. If the OMC should influence member state social policies in order to achieve common targets and goals, can it leave the share of responsibilities in the area of social policy as it was before the introduction of the OMC? In other words, is it legitimate that national policy-making processes are influenced by the targets and goals of the OMC although these targets and goals have not been decided in the classical policymaking processes of the EU (see Chapter 2)? In order to evaluate this question, one needs to know more about the degree and character of influence the OMC has upon national social policy-making as discussed in the previous section. This would involve engaging in a theoretical assessment of the legitimacy of the special kind of influence exerted by the OMC on member states. A final question for a ‘second-order’ evaluation of the OMC is whether it contributes to the overall legitimacy of the EU. This question is related to the argument that the OMC has been introduced in order to avoid a backlash from member states and their electorates against increasing market integration and associated welfare state retrenchment. From this perspective, the introduction of the OMC has served to emphasize the ‘social face’ of European integration without shifting substantive competencies in EU social policy to the EU level. The OMC could therefore strengthen the EU’s overall legitimacy if the EU derives its legitimacy from an ability to solve social problems, that is to be effective in its social policies and therefore increase output-legitimacy. In order to achieve this, the OMC must be perceived by EU citizens to be a means of solving EU-wide problems such as unemployment and poverty. If the OMC is effective in this sense, it could enhance the EU’s overall output-legitimacy. An evaluation of this question of legitimacy should therefore analyse whether the social policy goals of the OMC are achieved and how influential the OMC is in national policy-making. Moreover, it is informative to take citizens’ opinions regarding the EU and its role in social policy into account. This can be achieved through studying the results of Eurobarometer data regarding European citizens’ opinions about the legitimacy of the EU, the EU’s contribution to solving ‘social problems’ and, in particular, the role of the OMC in tackling issues such as unemployment and poverty. Treaty basis of the OMC A first step in evaluating the legitimacy of the OMC is to examine the question of whether or not the OMC has a treaty basis or is coherent with the Treaty of the European Communities. This question can clearly

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be positively answered for the European Employment Strategy because it is laid down in Articles 125–30 of the Nice Treaty (introduced through the Treaty of Amsterdam in 1998). The question of the formal legitimacy of the OMC in social inclusion, pensions and health is more difficult to be judged upon. For these OMCs no explicit treaty basis exists for the time being. One can however argue that the OMC in social inclusion and social protection is covered by Article 137 which states that the ‘Community shall support and complement the activities of the Member States’ in fields such as social security and social protection of workers and the combat of social exclusion. Section 2 of Article 137 also allows the Council to ‘adopt measures designed to encourage cooperation between Member States through initiatives aimed at improving knowledge, developing exchanges of information and best practices, promoting innovative approaches and evaluating experiences, excluding any harmonization of the laws and regulations of the Member States’. So despite the lack of an explicit treaty basis the OMC in social inclusion and social protection is arguably covered by these provisions. An explicit inclusion of the OMC into the treaty was discussed by the European Convention and the course of these discussions reveals the tensions related to the legitimacy of the OMC. Including an explicit treaty base for the OMC was opposed during the negotiations of the European Convention working groups since it was feared that the OMC might undermine the production of social EU law (crowding-out) and the democratic character of the OMC was perceived as dubious (cf. European Convention 2003: 18, 19; OSE 2003). Nevertheless, the adopted but not ratified Constitutional Treaty refers to OMC-procedures in several policy areas albeit without using the term ‘Open Method of Coordination’. The proposed Constitutional Treaty contains a new paragraph III-213 emphasizing that the ‘Commission shall encourage cooperation between the Member States and facilitate the coordination of their action in all social policy fields under this Section’. This paragraph contains a more explicit treaty base for the OMC, however, it seems as if the Constitutional Treaty of the European Union has been buried after its refusal by the French and Dutch referenda. But overall, the OMC is at least compatible with or even explicitly included in the Treaty of the European Communities. The principle of subsidiarity The legitimacy of the OMC can also be discussed with specific regard to the principle of subsidiarity. The Council has argued that the OMC is legitimate because it is applied in accordance with this principle. This emphasis on subsidiarity in the OMC requires that the introduction of

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the OMC has not shifted the previous state of distribution of competencies in the field of social and labour market policies between the EU and the member states. The EU only plays a co-ordinating role; the main responsibility for policy-making remains at the member state level. Some academic authors in the debate refer to this argument by the Council when claiming the legitimacy of the EES or other OMCs: The absence of binding effects renders the construction of consensus between the Member States possible as it concerns the adoption of objectives set by the Union in sectors that perhaps under different conditions would have been rejected. Precisely for these reasons, OMC incorporates a strong dimension of democratic legitimisation within and between countries (Amitsis et al. 2003: 91). A similar argument is made by Syrpis who states that national and regional autonomies in social policy should not be threatened and that the OMC might be a way to guarantee this requirement and support the EU’s legitimacy as long as the principle of subsidiarity is strictly applied (Syrpis 2002). Other authors have remained more critical about this point. This criticism is formulated from different points of view. Some authors argued that competencies for social policies should remain entirely at the national level or should even be delegated and decentralized to the regional and local level in order to be legitimate and effective. Authors of this opinion fear that the EU may potentially extend its competencies into the field of social policy through the OMC. This points to a tension inherent in the OMC framework between voluntarism – as regards compliance to objectives, guidelines and so forth – and the informal intervention in national policy-making by the Commission and the Council: In a nutshell, there is a tension between the logic of peer cooperation, on which the OMC is based, and the desire stated in Lisbon to entrust the European Council with a centralized steering role. As previously has been exemplified, the dynamics of OMC are essentially based on voluntary cooperation, with the specific concerns of each policy community and the professional pride of the participants playing driving roles. In this framework, any attempt at outside control strongly risks being perceived as an illegitimate interference (Dehousse 2002: 16; also Haahr 2004). Other authors have argued that there is an inherent tendency of organizations and especially of informal policy networks to expand their original

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scope. Here, the danger is seen that expertocratic OMC networks may illegitimately expand the original scope of their tasks (e.g. Berghman and Okma 2002; Dehousse 2002: 18). To summarize, for those who think social policy should in general be dealt with at the member state level, the OMC can pose a problem if the European Commission and Council are perceived as intervening into national policy-making. I will explain in the following section that this argument which is based on the principle of subsidiarity is not my main concern about the OMC. Rather it is the opaque and unaccountable way in which national social policies are framed by the OMC. Legitimacy of the OMC’s role in national policy-making After having discussed whether the OMC is coherent with its self-set goals of formal legitimacy and the principle of subsidiarity this section will argue that it is not the fact that the OMC plays a role in national social policy-making which poses a problem but the way in which it does so. The problem starts with how the OMC objectives are adopted at the European level. These processes of adopting the OMC objectives are not transparent to the electorate because it is not clear which actors take part in it and which responsibility the individual actors have in formulating the objectives. When the objectives are developed, the member state governments also consult with non-governmental policy actors which can potentially influence the formulation of these goals. The European Commission and Council also consult with a wide range of other European and national non-governmental actors and again it is not clear which impact they have in developing the objectives. The member state governments can negotiate with the European Commission about the OMC objectives and recommendations ( Jobelius 2003). This means that objectives and recommendations can be geared towards governments’ preferences and policy agendas if they were successful in the negotiation with the Commission. Governments will be interested in influencing the OMC objectives or recommendations if they find them useful as an additional justification for policy reforms. The problem with this is that the electorate will not be aware of these decision-making processes behind closed doors because the European and national parliaments are not involved in them and because the decision-making processes in these policy networks or bilateral negotiations are not documented and made available for public utilization. The previous chapter documented that the OMC indeed plays a role in national policy-making. However, the OMC’s role in this regard is not democratically controlled. Government and opposition parties, social

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partners, NGOs and other political actors can and partially do refer to the OMC in order to strategically support their positions and demands by the OMC. For instance, unpopular decisions were additionally legitimized by or ‘blamed to’ the OMC in several member states (Ardy and Begg 2001: 12; Radaelli 2003b: 7). This can be problematic if parliaments did not have an influence on the formulation of the OMC objectives and recommendations. Several OMC studies made the theoretical claim that the OMC could be able to shift power relationships between political actors at the national level and strengthen actors who were less powerful before such as antipoverty NGOs or the social partners (e.g. Jacobsson 2005: 109). Empirical studies provide little support for the assumption that the OMC can strengthen less powerful actors. Studies from member states such as Sweden, Denmark and Germany report that trade unions, for example, became more and more critical about the OMC because they feel it does not support their aims while employers refer to the OMC in order to support their own position (Büchs and Friedrich 2005; Jacobsson 2005: 117f.). Furthermore the question arises as to whether informal participation of ‘civil society’ actors increases the capacities of less powerful actors or whether it rather weakens them. Currently it seems as if the OMC actually contributes to the manifestation of previously existing asymmetries in power relations between different political actors – to the disadvantage of those who support a strong ‘social Europe’ and aim to balance economic and social policy objectives at the EU and the member state levels which was one of the original aims of the OMC. Moreover, the previous chapter demonstrated that the OMC is not yet effective in achieving its social policy goals but that it is used by domestic policy actors in an unbalanced way which favours flexibility over security and the growth of employment over the quality of jobs. The OMC therefore seems to support a shift towards a more ‘neo-liberal’ social policy agenda in the majority of member states. This can also be explained by the fact that the OMC is embedded into the ‘Lisbon Strategy’ which focuses on economic growth and budget stability. The instruments related to these goals – the Stability and Growth Pact and the Economic Policy Coordination – are more relevant to member state governments than the social policy OMCs. Therefore it is likely that a scenario is evolving in which the OMC has unintended consequences: instead of providing for its original goals of more and better jobs, eradicating poverty and more social equality the OMC tends to assist member state governments in adjusting their social systems to the prioritization of economic growth and international competitiveness.

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In summary, there are several interlinked problems with the legitimacy of the OMC’s role in national social policy-making. On the one hand, parliaments are not involved in the formulation of the OMC objectives, recommendations and quantitative targets. The actors who participate in their formulation and adoption cannot be held accountable by electorates because the decision-making processes are not transparent. On the other hand, national policy-makers partially use the OMC explicitly and strategically to justify – potentially unpopular – policy changes. Another possibility is that national policy-makers adopt OMC approaches or adjust their policies to the OMC objectives without making this explicit and transparent to the electorate. Even if national policy changes are still adopted by national parliaments the OMC can frame and pre-structure policy options by providing frames for interpreting social problems and offering solutions to them. However, the production of these frames is not democratically controlled and therefore poses problems in terms of democratic legitimacy. Increasing the overall legitimacy of the European Union? Finally it is important to discuss the claim that the OMC will contribute to the overall legitimacy of the EU. I will argue here that the optimistic suggestion that the OMC could enhance the EU’s overall legitimacy ( Jacobsson 2001: 11; Scott and Trubek 2002: 8; Telò 2003: 263ff.) is actually based on the idea that the OMC will strengthen ‘social Europe’ and therefore the ‘output-legitimacy’ of the EU. Output-legitimacy can be distinguished from input-legitimacy (Scharpf 1999: 6ff.). Policies are outputlegitimate when they meet the interests of the citizens affected by these policies, that is when these policies are effective in the sense that they contribute to solve problems (‘politics for the people’). Policies are inputlegitimate when they reflect the will of citizens which are normally provided for by procedural arrangements related to the majority rule (‘politics by the people’) (Scharpf 1999: 6ff.). According to Scharpf, input-legitimacy requires a common political identity of the citizens who are affected by policies produced according to the majority rule. The reason for this is that input-legitimate processes create the trust that the policy outputs are not just related to the aggregation of self-interested preferences (ibid. 7). In contrast, output-legitimacy can be generated without such a common political identity, since what counts is that political decisions meet the citizens’ interests. My hypothesis is that the legitimacy discussions regarding the OMC are actually related to output-legitimacy rather than to input-legitimacy. They seem to be strongly influenced by the assumption that EU policies

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are not able or do not require to be legitimized through ‘input-oriented’ legitimacy (a view supported by scholars such as Majone 1998; Scharpf 1999; Moravcsik 2002). This position does not support to provide the EU parliament with authorities similar to national parliaments. The main reasons for this perspective are twofold. On the one hand, the introduction of input-legitimate institutions is not regarded as possible, due to a lack of ‘European political identity’ (Scharpf 1997: 20). On the other hand, input-legitimate institutions in the EU are not conceived as necessary since the EU is primarily engaged with regulatory policies not having redistributive effects (Majone 1998) and because the institutional system of the EU already provides for accountable, transparent and medianvoter-oriented policies (Moravcsik 2002). Furthermore, both Majone and Moravcsik believe that a parliamentarization of the EU would lead to ineffective policy processes and suboptimal policy outcomes due to a politicization of EU policies (Follesdal and Hix 2006: 537ff.). This school of thought presumes that the EU derives it legitimacy from the effectiveness of EU policies (Scharpf 1999: 22). Scharpf’s analytical assumption that legitimacy at the national level is derived from input-oriented as well as from output-oriented legitimacy mechanisms has been transformed by some scholars of this school of thought into a normative statement denying the appropriateness of input-oriented legitimacy mechanisms for the EU. Evaluations of the OMC’s effectiveness and legitimacy, which are influenced by the hypothesis that effectiveness of EU policies is the main legitimacy source for the EU, would firstly assume that the OMC’s legitimacy is mainly based on its effectiveness and secondly that if the OMC is effective it also contributes to the EU’s (output)-legitimacy. There are three indicators suggesting that this ‘logic’ that the OMC contributes to the EU’s output-legitimacy and therefore increases the EU’s overall legitimacy is implicitly applied in most OMC evaluations. A first indicator is that, compared to questions of effectiveness, the legitimacy of the OMC is less widely discussed in the literature. Since the OMC is established in the employment title of the Amsterdam Treaty and since it does not aim to transfer substantial authority to the EU in the area of labour market policy, the OMC’s legitimacy is widely taken for granted. Instead, the focus of the literature is on the OMC’s effectiveness because many authors implicitly start from the hope that the OMC could strengthen ‘social Europe’ (Goetschy 2001; Scharpf 2002). The implicit assumption may be that by strengthening the EU’s social dimension, the OMC contributes to the EU’s legitimacy. Secondly, those articles concerned with democratic aspects of the OMC focus on the participation of interest groups, NGOs and regional/local

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representatives in OMC processes. As noted above, the call for wider participation often derives from a pragmatic perspective seeking to render policies more effective. Those authors believing that informal ‘civil society’ participation could enhance the EU’s democratic quality (including the EU itself, see Commission of the European Communities 2001d; Jacobsson 2001: 11; Scott and Trubek 2002: 8; Zeitlin 2005a: 23) do not pay enough attention to unresolved underlying power-asymmetries. Direct participation of selected civil society actors can, therefore, even be an impediment for increasing input-legitimacy of policies. This is the case if citizens suspect that the direct participation of selected civil society actors distorts political decisions and privileges private interests. In summary, the support of the direct participation of civil society actors can be interpreted as an implicit focus on rendering policies more effective and therefore output-legitimate instead of enhancing input-legitimacy. A third indicator is the role that the concepts of deliberation and participation play in theories of policy learning applied to the OMC. Normally, deliberation and participation are important concepts in democracy theory and are therefore regarded as mechanisms able to generate legitimacy of political decisions. In the OMC literature, the participation of ‘civil society’ actors and deliberation in small policy networks are regarded as means to diffuse new policy concepts and ‘best practices’ and to convince participants of these new concepts (e.g. Eberlein and Kerwer 2004; Jacobsson 2004a). Therefore, the prominence of deliberation and participation in OMC policy learning theories is based on the assumption that these two features increase the potential effectiveness of the OMC rather than its democratic quality. These three aspects are signs that OMC features presented as democratic assets by the EU and some academic scholars can implicitly be conceived as increasing the OMC’s effectiveness and therefore contributing to the EU’s legitimacy through problem-solving. Two questions arise from these considerations: is the objective that an effective OMC should increase the overall legitimacy of the EU realistic and how should we judge upon this objective from a normative point of view? As to the first question the previous chapter demonstrated that the OMC objectives have not been reached and that it therefore has not been effective in achieving its social policy goals or in strengthening ‘social Europe’. This would be a precondition for enhancing the EU’s outputlegitimacy if one assumes that citizens favour the OMC’s ‘third way’ policy approach. European citizens can, however, not democratically control the formulation of the OMC objectives. From a normative point of view, this links to a more fundamental problem with the assumption that the OMC could enhance the EU’s output-legitimacy. This problem has to do

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with the argument that output-legitimacy is a sufficient basis for both the OMC as well as the EU. First, the OMC is applied in a very sensitive policy area. Labour market policies directly or indirectly affect the majority of the population. The OMC itself does not deal only with marginal and technical questions of labour market policy but with very sensitive political issues. It seeks, for example, to influence overall labour market policy concepts, to affect eligibility rules for labour market policy measures, to extend the effective age of labour market exit, to impact on collective bargaining and wage setting patterns, and to promote labour market policy decentralization. Scharpf himself has restricted his argument that output-legitimacy is a sufficient legitimacy source for the EU by emphasizing that this is true only if the EU’s authority is confined to ‘consensual’ policy areas (Scharpf 1999: 22f.). Consequently, if the OMC would have effects (which it has) or would even be effective regarding issues that would not be supported by a representative set of voters, this could negatively affect the EU’s overall legitimacy. Another reason does not apply only to the OMC but also to EU policymaking in general. This reason is related to the view that EU policies can achieve legitimacy mainly by being effective and by meeting the ‘interests’ of the citizens. This assumption is closely related to an objectivist and positivist position. It is based on the view that social phenomena exist independently from observers and that they can be objectively described and identified by using scientific methods. Consequently, social problems and the design of policies responding to these problems can be objectively identified by (academic) experts outside of parliamentary and inputlegitimate policy-making processes. The results and decisions of deliberations amongst experts and governments are supposed to meet the interests of the citizens because they are objective and contribute to solving social problems. According to this objectivist position, the ‘regulatory’ policies of the EU do not need to be decided in input-legitimate policy processes because they do not involve ethical issues and do not have any redistributive effects. Policies are sufficiently legitimated if they are effective and produce output-legitimacy. These assumptions can be questioned from a social constructivist perspective. Social constructivists think that social issues cannot be perceived as independent from the social and historical context. Instead, observations and judgements about society depend on social and political interaction and on dominant ideas embodied in social institutions. Consequently, it is not possible to objectively define policy responses to social problems because opinions about policies are closely related to socially constructed

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views on social problems (Manning 1985; Clarke 2001). From this perspective, every judgement about social issues is related to particular perspectives and political interests. Also technical issues are social issues in the sense that they have an impact on society. For this reason it is difficult to exempt them from these considerations. Due to the ‘social construction’ of political positions, there is no objective standpoint that is able to identify the ‘interests’ of the citizenry. First, every decision will affect different groups in society differently. Secondly, citizens’ interests are not independent from public debate but they are shaped by participating in public discussions on political matters (Follesdal and Hix 2006). For all these reasons constructivists would argue that policies cannot be output-legitimate if they are not decided upon in input-legitimate policy processes. The argument is not only that output-legitimacy is not sufficient at the EU level but that output-legitimacy cannot be achieved if political decisions have not been taken in input-legitimate policy processes, that is if there are no public and parliamentary discussions, no political contest, and if policy makers are not accountable to the citizens. Output-legitimacy cannot be achieved without input-legitimate decision-making processes. Citizens’ interests are not pre-existing but public discussion is crucial for establishing these interests. They also ensure that these wider interests are fed into policy formation. Furthermore, even if decisions taken by experts contributed to solving problems, citizens can regard the decision-making process as illegitimate because they do not trust the objectivity and neutrality of these decision-making processes. To conclude, this chapter argued that the OMC is problematic in relation to its democratic quality and legitimacy. While the OMC arguably fulfils some of its own objectives, for instance to be coherent with the Treaty of the European Communities and the principle of subsidiarity it does not sufficiently achieve the aim to involve a broad range of civil society actors. The discussion of these aims indicated that this is not the major legitimacy-related problem within the OMC. The more general problem is that EU and national parliaments only play a marginal role in the OMC and that no meta-rules for civil society participation in the OMC exist. Therefore, many important OMC decision-making processes take place behind closed doors. All in all, the decision-making processes linked to the OMC and the way in which the OMC plays a role for national social policy-making weakens parliamentary and representative democracy. The OMC is therefore not a suitable model of democracy for the whole EU as it has been suggested by scholars promoting directly-deliberative democracy (Cohen and Sabel 1997; Gerstenberg and Sabel 2002).

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In its current version, the OMC actually aims to increase the effectiveness of a ‘third way’ economic and social policy model. The empirical analysis of the role that the OMC so far played in social policy-making at the national level suggests however that the OMC is not able to bring ‘social’ and ‘economic’ Europe into balance but that it might rather be a vehicle to render the Lisbon process and its competitiveness agenda more effective. A more fundamental problem arising from this discussion is that the OMC is closely linked to the idea that the EU’s legitimacy can only be based on output-legitimacy at the expense of input-legitimacy. Is it possible to strengthen input-legitimacy in the OMC? One might find that this question poses a new dilemma which will be discussed in the conclusion.

8 Conclusion

This book provides an evaluation of the OMC’s effectiveness and legitimacy. It arrives at the critical conclusion that the OMC has not achieved its goals and that it might even introduce new problems. In short, the OMC promised to be a middle-way solution in several regards, but it turned out that this middle-way bears many tensions and dilemmas which stand in the way of goal achievement. The OMC was constructed as a middle way solution in two ways. First, it aimed at reconciling the economic and social objectives of the EU, based on the ‘third way’. However, this approach left the social objectives of the EU subordinated under its economic objectives. Secondly it provided the EU with a role in social policy-making without formally limiting member state authority in this area. This led to the establishment of a complex and opaque multi-level governance system which is not effective in reaching its aims while at the same time has also produced problems of democratic legitimacy. In this concluding chapter I will discuss why the OMC was not successful in strengthening ‘social Europe’ despite the great hopes that politicians and academics held on its introduction (European Council 2000a: 15; Ferrera and Rhodes 2000: 278; De la Porte and Pochet 2002b: 12f.). Secondly I will analyse the problems related to the new multi-level governance architecture that the OMC established in social policy. Finally I will consider three scenarios of how to proceed with the OMC and present a range of open questions resulting from this piece of research.

Social Europe and the OMC The OMC has certainly changed ‘social Europe’ but why has it not truly ‘strengthened’ the EU’s social dimension? 152

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The OMC has changed ‘social Europe’ in several ways. The introduction of the OMC has revived the political and academic debates about European social policy and the ‘European Social Model’. During this debate it became more explicit what the EU means by its ‘European Social Model’. It must be clear, however, that this is only a political definition and does not mean that now a unique ‘European Social Model’ is realized in all member states. The OMC also established a regular system of monitoring and evaluation of member states’ social policies and outcomes producing a stock of comparative knowledge and material on member state social policy development. Through the OMC’s participatory strategy some actors such as social partners, NGOs and local or regional governments may now be more intensely involved with European social policy issues than before the OMC’s launch. Initial fears the OMC could replace existing ‘hard law’ in European social policy have not been confirmed by the literature (Falkner 2006). Yet it cannot be ruled out that the OMC was a hindrance to a further expansion of European social law. Have these changes strengthened ‘social Europe’? This is one of these difficult – ‘is the glass half empty or half full’ – questions the answer to which depends on the criteria applied. The optimists will argue that the OMC is a step forward compared to the pre-OMC situation and that ‘social Europe’ has become stronger as a result of its introduction. The pessimists however will have to take the OMC’s goals and the situation to which it responded into closer consideration. In terms of the OMC’s self-stated goals, the quantitative targets of the European Employment Strategy for 2005 have not been achieved and it seems very unlikely that the targets for 2010 will be reached in time. There are also gaps in the achievement of some of the broader OMC goals such as the fight against poverty and the promotion of social cohesion. The average poverty rate remained persistent in recent years and even increased between 2004 and 2005. The same holds for income inequality measured by the Gini-coefficient. While a slight convergence of employment and unemployment rates between the member states has taken place, there are still huge gaps among member states regarding the employment and unemployment rates of young and older people. The gaps between employment rates of older people are even increasing since 2001 and the development of unemployment rates has not indicated a clear trend towards convergence between the early 1990s and 2005 (see Chapter 6). Furthermore one has to consider that the OMC was created and presented as a means to strengthen ‘social Europe’ against the EU’s dominant agenda of ‘negative integration’ (e.g. Ferrera and Rhodes 2000: 278). This sought to prevent a ‘race to the bottom’ and to increase the EU’s legitimacy

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in the wake of monetary union and eastern enlargement. The OMC has, however, not reversed the imbalance of the EU’s objectives. The Treaty provisions defining the EU’s primary task to create a single market remained whilst the OMC has not created an equal EU authority in social policy or any social rights. The OMC is also embedded in the framework of the monetary union and the agenda of completing the single market. Several authors stated that within this framework the OMC is clearly subordinated under the Stability and Growth Pact, economic policy coordination and the market-making aspects of the Lisbon agenda (De la Porte and Pochet 2002c: 51ff.; Larsen and Tayler-Gooby 2004: 203). The guidelines for fiscal policy defined by the Stability and Growth Pact as well as the legally binding provisions of the single market project will therefore be prioritized in national policy-making as well. In addition, the OMC is closely linked to a ‘third way’ concept of social policy which is in some ways inconsistent. The ‘third way’ requires that social policies are contributing to economic efficiency and economic growth as well as to stable public finances. This can be understood as a concept which aims to distinguish a ‘European’ from an American or Asian approach to social policy. The ‘European’ approach stresses that social policies need not be detrimental to economic efficiency if they are designed in the right way. The third way is therefore presented as more concerned with social equality than the American approach. In practice, however, many social policy and equality related goals require public expenditure. Such policies will always be regarded as an intervention into markets and therefore as a limitation of economic efficiency. They are therefore still at risk of being restricted in order to foster economic growth within a ‘third way’ social policy framework. The OMC’s subordination under the Stability and Growth Pact and Lisbon’s single market agenda will further contribute to this trade-off. Moreover, since the OMC objectives are not binding and formulated in a very general way, the OMC remains vulnerable to changing political majorities. The empirical examination in Chapters 5, 6 and 7 provides examples indicating that social democratic parties and governments interpreted and ‘instrumentalized’ the OMC in other ways than conservative ones. The OMC was introduced when the majority of member states were governed by social democrats. This situation has been reversed in the meanwhile resulting in some commentators suggesting that ‘social Europe’s window of opportunity is closing’ (Manow et al. 2004: 33). For all the reasons listed in the above paragraphs one can argue that the OMC has not strengthened Europe’s social dimension in comparison to its economic goals. An important question that arises from this conclusion is: what impact will European integration have on European

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welfare states if market-correcting objectives and policies remain subordinated under the EU’s market-making agenda? Optimists argue that open markets and European integration do not lead to welfare state retrenchment because open markets, labour market flexibility, a common currency and a strict monetary policy will enhance productivity and economic growth. They further assume that economic growth then translates into rising living standards and sustains the financial basis for national social protection systems. Another version of the welfare-state-resilience thesis is that the characteristics of political institutions and/or the path-dependency and inertia of national welfare systems prevent major welfare state retrenchment (Pierson 1994; Swank 2002; Taylor-Gooby 2004) or that most welfare systems are able to adjust to the open market context without substantial retrenchment (Scharpf and Schmidt 2000b: 19f.; Scharpf and Schmidt 2000a: 335). Pessimists however maintain that open markets, capital mobility and increasing international competition restrict the capability of national governments to levy taxes (Scharpf 1999: 86ff.). They further fear that the situation in the EU is particular in that the Stability and Growth Pact rules out the usage of ‘deficit spending’ to boost economic growth and social protection (ibid.). Some authors also interpret the changes in welfare state systems as cutbacks and signs for a weakened welfare state rather than as neutral adjustments to a new open market context (e.g. Rothgang, Obinger et al. 2006; e.g. Starke 2006: 115). The most pessimistic view claims that open markets and capital mobility will inevitably lead to the erosion of welfare standards and institutions and to a convergence towards a minimal and liberal model of welfare (Coates 2000: 244, 250). It is certainly difficult to agree to the functionalist basis of the latter assumption. Therefore, and the exact impact of open European and international markets on the welfare state remains unclear. However, a negative effect of open markets and European integration on welfare standards and social equality cannot be ruled out. In this case the OMC alone does not provide the means to prevent a downgrading of social standards and an increase of social inequalities. Neither has it contributed to the outputlegitimacy of the EU. One example is that the ‘no’ to the Constitutional Treaty in France and the Netherlands was also motivated by the fear European integration and enlargement could erode social standards (Kenner 2005: 542).

‘Invited dutifulness’ and its problems The OMC not only scores poorly in regard to strengthening ‘social Europe’ but it also creates new problems. These problems are related to the new

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Evaluation

multi-level and multi-actor governance system which it established in European social policy. Proponents of the OMC hoped that this new system of informal exchange, monitoring and exhortation provides for either voluntary and bottom-up policy learning or for top-down ‘naming and shaming’ supporting domestic policy reforms. This study argues that the OMC neither purely works as a bottom-up nor a top-down mechanism. It rather presents a mixture of both. This mixture unfortunately entails that the roles and responsibilities between the EU level and the member state level as well as a range of non-governmental actors at both levels become blurred. The EU got involved in policy-making in the areas covered by the OMC but it has not acquired the means to guarantee social provisions and entitlements. Member states formally retained the authority in social policy making but agenda setting and programme formulation are increasingly influenced by the OMC and the EU’s single market framework. The problem with this is that the OMC has established an opaque system of political negotiations which are not documented and publicized. This provides the opportunity for a system of political communication which obscures real responsibilities to the public and citizens. An example for this is the scenario of ‘invited dutifulness’. ‘Invited dutifulness’ is a ‘two-level game’ (Putnam 1988; Büchs forthcoming) in which national governments agree to OMC objectives out of domestic interests but do not reveal this stance to their electorates. They subsequently ‘blame’ the EU for the necessity of potentially unpopular policy reforms. The empirical forthcoming analysis of how the OMC is used at the member state level provides a number of examples where this is the case (see Chapters 5 and 6). Member state governments are not accountable for setting the OMC objectives because these objectives do not have to be approved by national parliaments or be transposed into national law as it is the case with EU directives. This is one of the major differences between the OMC and other, binding EU provisions. In addition, the OMC is praised by the EU and many scholars for its participatory features. These encourage the involvement of non-governmental actors at the member state and EU levels in the processes of defining the OMC objectives and quantitative indicators as well as in the ‘implementation’ of the OMC. There are, however, no clear rules which actors should be involved in which phases and what rights and responsibilities they have in the OMC processes. Since decision-making processes in these multi-layered and multi-actor policy networks are not documented, or such documents are not publicly available, the decision-making process is not transparent and the participating actors cannot be held accountable by electorates.

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A related problem is that agenda setting in social policy-making has been moved away from national parliaments towards these opaque actor networks. National parliaments are neither involved in defining the OMC objectives nor in setting-up the ‘National Reform Programmes’ or ‘National Strategy Reports’. Even if national parliaments still have to adopt national laws in social policy, the policy agendas have been defined in other arenas. The argumentative and justificatory framework of the OMC and European integration more generally seem to provide little room for alternative discussions and projects. So all in all the new mode of ‘invited dutifulness’ established by the OMC in European social policy brought about new problems in terms of opaqueness and unaccountability of policy-making.

Reforming the OMC? These findings lead to the question of whether and how the OMC can be reformed to address the problems identified above. Based on the results of this empirical and conceptual study I want to consider three main reform options: abandoning the OMC, establishing a legally binding OMC framework, and introducing provisions to enhance its transparency, accountability and legitimacy.1 First, if the OMC does not strengthen ‘social Europe’ as it is hoped by its proponents but rather brings about new problems one option could be to abandon it. In considering the option of abolishing the OMC it becomes obvious that the OMC-induced system of regular monitoring and reporting has its positive sides. It provides a huge comparative set of knowledge about social policy developments and outcomes in all member states. This pool of knowledge should not be dismissed because it could indeed be a source of cross-national inspiration for domestic policy-making. However, if the mechanisms for defining OMC objectives and quantitative indicators cannot be significantly improved in the current context it would be more transparent and honest to delegate these tasks to an independent academic organization or network. This would remove the process of defining objectives and indicators away from political bargaining behind closed doors which is currently presented as an objective and neutral process, thus obscuring underlying power asymmetries. At the same time such an independent body or network could also provide the opportunity of integrating other and more diverse objectives and indicators in the OMC portfolio. Secondly it has been proposed, for example by Scharpf (2002), to establish a legally binding framework for the OMC. Thereby the OMC

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Evaluation

objectives would be adopted as binding (framework) directives. Directives only define general rules which leave considerable room in deciding how they should be transposed into national law. By creating a binding framework it is hoped that the OMC would become more effective because the EU could formally sanction member states if they fail to comply with these provisions. In addition, the OMC objectives would be adopted in the ‘normal’ process of EU policy-making in which national governments are accountable to their parliaments. The task of transposing the directives into national programmes would lie with national parliaments. However, one can argue that the current institutional framework of the EU is not suitable for such a reform. Social policies potentially entail redistribution. Therefore they need to be based on input-legitimacy associated with mechanisms guaranteeing the input of the ‘will of the people’ provided by parliamentary democracy (Scharpf 1999: 6ff.). Currently, policy-making at the EU level is dominated by national governments in the Council whilst the EU Parliament still plays only a complementary role. Furthermore, no truly European political parties exist, the Commission is not elected, there is no political opposition and therefore a lack of contestation and the European public sphere remains limited (e.g. Follesdal and Hix 2006). This second reform option of establishing a binding OMC framework is therefore problematic from a legitimacy perspective. Moreover, consensus on such an option is lacking among member state governments so that it is unworkable as well. Thirdly one can argue that the OMC is a new response to a very complex and particular situation of European social policy-making in a multilayered system which should neither be abandoned nor replaced by ‘old’ means based on a legally binding framework. The focus then shifts to the question as to how the existing flaws of the OMC could be improved. First of all the decision-making process on objectives and indicators needs to be much more transparent. This requires clear rules about the rights and responsibilities of actors at all levels who are involved in OMC decision-making processes. Moreover, the decision-making processes must be accurately documented through attendance lists and discussion scripts. These documents must be publicly available and it should be obligatory to provide them to national parliaments. This would include decision-making in the Council of the European Union and the European Council. In addition, the EU and national parliaments should be involved in setting the OMC objectives and indicators as well as in setting up the national and European plans and reports. This would re-parliamentarize the OMC and agenda setting in social policy-making more generally. The proposal of integrating

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parliaments more intensely in OMC processes has been frequently made in the literature (e.g. De la Porte and Pochet 2005: 360, 375). Despite this it has so far not been earnestly discusses at the EU level. This is probably related to the awkward position that would be taken over by parliaments in this framework since they would participate in generating non-binding provisions which contradicts their original scope of law-production. Finally, the review of the whole OMC as a governance method should become an obligatory and inherent feature of the OMC. This review would not only include the regular update of OMC objectives but also a scrutiny of its procedures and instruments.2 Comparing these three reform options, the first is the most honest but backwards oriented one, the second the most ambitious but unrealistic and the third the possibly most innovative but difficult one. It is the most difficult option because it remains closest to the currently existing OMC approach and might therefore be limited by the OMC’s inherent contradictions thus impeding its envisaged goals. This review of the book’s results finally leads me to ask which research questions follow from it. Here I want to identify two areas which are related to the two main problems of the OMC identified above. The first concerns the future of ‘social Europe’ and the second the effectiveness and democratic legitimacy of ‘new governance’. To start with, it is still unclear which long-term impact the creation of the common European market, monetary union and eastern enlargement will have on the welfare states in the EU. Research in this area has to cope with immense methodological problems related to the complexity of this area such as the interaction between different policy fields and the time-consuming task of examining policy-making processes in all EU member states. Existing literature focuses on detailing existing EU social policy provisions (e.g. Geyer 2000; Hantrais 2000) or theorizes on a relatively general level on the impact of ‘negative integration’ on social Europe (e.g. Scharpf 2002; Offe 2003a). More detailed research is therefore needed on the impact of individual EU provisions on national social policy, for instance of the Stability and Growth Pact, competitiveness policies – in particular the regulations on state aids, the planned services directive, the provisions for services of general interest and enlargement to name but a few. The second identified area of ‘new governance’ is equally important since ‘new governance’ is not only spreading in the EU but also at the national and global level (Kooiman 1993; Held 1995; Rhodes 1996; Pierre and Peters 2000). Although publications in this field are mushrooming, many of them are written from an affirmative normative perspective. What is still required is a down-to earth, precise and critical analysis of

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Evaluation

the consequences of new governance methods. Which positive qualities of ‘old’ mechanisms of government such as the rule of law, the separation of powers, the accountability of the governors and democratic legitimacy are exposed to erosion and how can they satisfactorily be replaced or reinstalled? What exactly is the future role of national governments in this system of complex multi-level governance in which governmental tasks are increasingly shared with or delegated to private actors? The analysis of the OMC provided by this book has pointed to some of the problems related to ‘new governance’ but more conceptual and comparative empirical research is required.

Appendix List of interviews Number of interviews

Interviews on the EES 3 2

1 1 1 2

2 1 1 1 1 1 1 2 1 1 1

1

1

EU Commission, DG V Employment and Social Affairs Federal Ministry for Economics and Labour (Bundesministerium für Wirtschaft und Arbeit, BMWA) (⫹ 3 follow-up interviews with the same person) Federal Ministry of Finance (Bundesministerium der Finanzen, BMF ) Federal Ministry for Family, Older Persons, Women and Youth (Bundesministerium für Familie, Senioren, Frauen und Jugend, BMFSFJ ) Federal Ministry for Education and Research (Bundesministerium für Bildung und Forschung, BMBF) Ministry for Work, Construction and Regional Development Mecklenburg-Western Pomerania (Ministerium für Arbeit, Bau und Landesentwicklung Mecklenburg-Vorpommern) Department for Work and Social Issues Bremen (Senat für Arbeit und Soziales, Bremen) Ministry of Economy and Work in Saxony (Sächsisches Staatsministerium für Wirtschaft und Arbeit) Ministry of Economy and Work in Saxony-Anhalt (Ministerium für Wirtschaft und Arbeit Sachsen-Anhalt) Federal Employment Agency (Bundesagentur für Arbeit) Institute for Labour Market and Occupational Research (Institut für Arbeitsmarkt- und Berufsforschung, IAB, Nürnberg) Arbeitsamt Stuttgart (employment office Stuttgart) Confederation of German Employers’ Associations (Bundesvereinigung der Deutschen Arbeitgeberverbände, BDA) German Federation of Trade Unions (Deutscher Gewerkschaftsbund, DGB) German Chamber of Industry and Commerce (Deutscher Industrie- und Handelskammertag, DIHK) Alliance for Labour, Vocational Training and Competitiveness (Bündnis für Arbeit, Ausbildung und Wettbewerbsfähigkeit) Bundestag Committee for Work and Social Issues, 14th legislative period, SPD (Bundestag, Ausschuss für Arbeit und Sozialordnung, 14. Legislaturperiode, SPD) Bundestag Committee for Economy and Employment, 15th legislative period, SPD (Bundestag, Ausschuss für Wirtschaft und Arbeit, 15. Legislaturperiode, SPD) Bundestag Committee for European Issues, 15th legislative period, FDP (Bundestag, Europaausschuss, 15. Legislaturperiode, FDP) 161

162 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 7

Appendix SPD faction of Baden-Württemberg’s parliament (Landtag BadenWürttemberg, SPD-Landtagsfraktion) German County Association (Deutscher Landkreistag) German Association of Cities (Deutscher Städtetag) ‘Future in the Centre’ (‘Zukunft im Zentrum’, ziz) [ESF-funded project in Berlin, partner-project of the COSLA Local Action Plan project in the UK] Department for Work and Pensions (DWP), Joint International Unit ( JIU) Department for Work and Pensions (DWP), Social Inclusion Team Department for Education and Skills (DfES), Skills Strategy Department for Employment and Learning, Northern Ireland Executive Office of the First Minister, Northern Ireland Executive Enterprise and Skills Department, Scottish Executive Social Inclusion Team, Scottish Executive Wales Assembly Government Scottish Parliament, European and External Relations Committee Trades Union Congress (TUC) London School of Economics (LSE), expert Participants of the EES peer review programme (Austria (1), UK (3), Belgium (1), Greece (1), Germany (1))

Interviews on the European Social Fund 1 1 1 1 2 1 1

Federal Ministry for Transport, Building and Housing (Bundesministerium für Verkehr, Bau- und Wohnungswesen, BMVBW) Hessen Consult [ESF related regional agency] Department for Work, Women, Youth, Health and Social Issues Bremen (Senat für Arbeit, Frauen, Jugend, Gesundheit und Soziales Bremen) Structural Fund Administration in the Department for Economy and Work Berlin (Fondsverwaltung beim Senat für Wirtschaft und Arbeit Berlin) ESF Administration, Office for Economy and Work Hamburg (Verwaltung des ESF, Behörde für Wirtschaft und Arbeit Hamburg) Ministry for Economy and Work Saarland (Ministerium für Wirtschaft und Arbeit des Saarlandes) Department for Employment and Learning, Northern Ireland

Interviews on the OMC social inclusion1 1 1 1 1 1

1

EU Commission, DG V Employment and Social Affairs Federal Ministry for Economics and Labour (Bundeministerium für Wirtschaft und Arbeit, BMWA) Federal Ministry for Health and Social Security (Bundesministerium für Gesundheit und Soziale Sicherheit, BMGS) Ministry for Health and Social Issues Saxony-Anhalt (Ministerium für Gesundheit und Soziales Sachsen-Anhalt) Ministry for Social Issues, Women, Family and Health in Lower Saxony (Niedersächsisches Ministerium für Soziales, Frauen, Familie und Gesundheit) Ministry for Work, Social Issues, Family and Women in Bavaria (Bayerisches Staatsministerium für Arbeit und Sozialordnung, Familie und Frauen)

Appendix 1 1 1 1 1 1 1 1 1 1

163

Mecklenburg Western-Pomerania’s Information Office at the European Union (Informationsbüro Mecklenburg-Vorpommern bei der Europäischen Union) Saxony-Anhalt’s Information Office at the European Union (Verbindungsbüro des Landes Sachsen-Anhalt bei der Europäischen Union) German Federation of Trade Unions (Deutscher Gewerkschaftsbund, DGB) Confederation of German Employers’ Associations (Bundesvereinigung der Deutschen Arbeitgeberverbände, BDA) Federal Working Group Help for Homeless People (BAG Wohnungslosenhilfe e.V.) Welfare Association of Parity, Association in Baden-Württemberg (Der Paritätische Wohlfahrtsverband, Landesverband Baden-Württemberg) Workers’ Welfare Association (Arbeiterwohlfahrt) Lecturer at the College of Higher Education Darmstadt (Lehrkraft an der Fachhochschule Darmstadt) Lecturer at the Protestant College of Higher Education Bochum (Lehrkraft an der Evangelische Fachhochschule Bochum) Member of the Bundestag, Green Party (Mitglied des Bundestags, Bündnis 90/Die Grünen)

Brief interviews, email correspondence 1 1 1 1

1

1 1

EU Commission, EES indicator group Saxony-Anhalt’s Information Office at the European Union (Verbindungsbüro des Landes Sachsen-Anhalt bei der Europäischen Union) Ministry for Economy and Work in North Rhine-Westphalia (Ministerium für Wirtschaft und Arbeit des Landes Nordrhein-Westfalen) Commission for Modern Labour Market Services, ‘Hartz-Commission’ (Kommission für moderne Dienstleistungen am Arbeitsmarkt, ‘Hartz’Kommission) Institute for Social-Economic Structural Analysis, Berlin ESF objective 3 evaluation (SÖSTRA – Institut für Sozialökonomische Strukturanalysen, Berlin ESF Evaluation Ziel 3) Federal Working Group of Independent Unemployment Initiatives (Bundesarbeitsgemeinschaft unabhängiger Erwerbsloseninitiativen, BAG-E) Initiative New Quality of Employment (Initiative Neue Qualität der Arbeit, INQA)

Overview: policy actors’ positions and ways in which they refer to the EES Actor/category Government Position

UK

Germany

– in general: supportive of the EES – seeks to play an active role at the EU level

– in general: supportive of the EES – acknowledges requirement of stronger labour market policy coordination due to EMU (Continued)

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Appendix

Actor/category

UK

Produces documents only dealing with EES

– seeks to diffuse its – aims to preserve own approaches to European social model/ others and play an solidaristic model influential role – partially: in favour of – acknowledgement of a more binding EES interdependency with approach and other member states quantitative indicators – in favour of a non– not refusing any EES binding, benchmarking recommendations approach – openly refusing some EES recommendations, open conflicts with the EU Commission on certain EES aspects NAPs NAPs Position paper Position paper; examination of other MS’ NAPs (a) White Paper (a) draft laws reports to the parliament coalition treaty budget reports (b) reports; demonst (b) references to the EES rating its influential role;- to underpin its own recommendations for position and give other member states and reasons for reforms EU; comparisons reports – reports – to underpin its own – demonstrate its own positions influence – distance itself from – comparisons particular positions – reports

Refers to EES in other documents (a) which documents; b) which kind of references

Refers to EES in parliamentary discussions (discussions on NAP, discussion of EU events; discussion of domestic issues, for example draft laws)

Germany

Appendix

Actor/category Opposition Position

UK

Germany

Conservatives: in general much more Eurosceptical, against an EU constitution, against EU labour law directives, against economic coordination (for example speech of Evans) Liberal Democrats: pro constitution and pro Euro, but against ‘red tape’ and against binding EU social policies, sceptical of the EES

CDU/CSU: more sceptical of coordination as such, refusing a binding EES approach, sceptical of quantitative indicators, supportive of many content questions FDP – similar like CDU/ CSU, an even more market-liberal approch: the EES is only supported as long as it strengthens the deregulation agenda PDS: in general supportive, demanding a more binding EES; interprets the EES as directed at building an ‘active welfare state’ at the EU level no

Produces documents only no dealing with the EES Refers to the EES in other no documents (which documents; which kind of references)

Refers to the EES in parliamentary discussions (discussions on NAP, discussion of EU events; discussion of domestic issues, for example draft laws)

165

(few) questions to the government in parliament

in draft laws and statements of opposition factions handed in to parliament (comparisons, statements on the EES, references to support opinion in discussions on the NAP: statements to the EES, references to the EES to criticize government’s policies and to underpin its own demands for policy change; in discussions on draft laws: comparisons to other member states are more used than references to the EES (Continued)

166

Appendix

Actor/category Trade unions Position

UK

Germany

in general: supportive of the EES but a rather sceptical position towards the role and effectiveness of the EES in Britain

in general: positive towards employment policy coordination and to strengthening EU social policies; but increasingly sceptical about some aspects of the EES and how it is used by the Commission to pressure the government statements on the German NAP, statements on the JER, general statement to the EES, five year evaluation in press releases, not in statements on draft laws

Produces documents only dealing with EES

no

Refers to EES in other documents (which documents; which kind of references)

no

Employers/business organizations Position

against European policy coordination; but considers benchmarking as a useful instrument, supportive of Lisbon objectives (competitiveness; growth)

in general: sceptical of employment policy coordination, of a binding strategy; but supports non-binding benchmarking, exchange of information; against indicators against European employment programmes positive towards many aspects of the EES (flexibility, dereglation, lowering of taxes, social security contributions, ‘activation’ approach, and so on) (Continued)

Appendix

167

Actor/category

UK

Germany

Produces documents only dealing with EES Refers to EES in other documents (which documents; which kind of references)

no

statements on guidelines in press releases in statements on draft laws

Regions Länder Position

Produces documents only dealing with EES

Refers to EES in other documents (which ; documents which kind of references) Refers to EES in parliamentary discussions (discussions on NAP, discussion of EU events; discussion of domestic issues, for example draft laws)

in press releases and policy briefs

rather disengaged but generally supportive in the sense that they do not have much to gain or win since their competencies for LMP are limited Local Action Plan Project of Scottish Local Authorities; report of the Scottish Parliament Committee

sceptical regarding the issue of competencies; for some Länder: the EES as a resource for labour market policy planning over the ESF some (also ESF-related) Länder reports

draft laws of Länder handed in to federal parliament as representatives of governments in Bundesrat discussions on the NAP representatives of Länder government in the Bundesrat in discussions on other draft laws (comparisons)

Notes Acknowledgements 1.

Stipendium aufgrund des Nachwuchsförderungsgesetzes des Landes BerlinBrandenburg.

1

Introduction

1. In this book, the term ‘European social policy’ refers to social policies at the European and national levels as well as the interplay between these levels (Leibfried and Pierson 1995; Kleinman 2001: vii). 2. See also Radaelli (2003b), Héritier (2002), Eberlein and Kerwer (2004), Borrás and Jacobsson (2004), Gerstenberg and Sabel (2002), Hodson and Maher (2001), Mosher (2003), De la Porte et al. (2001), Rodrigues (2001), Scott and Trubek (2002), Telò (2003), Szyszczak (2006). 3. The basis for this was Article 103 TEC, renumbered into Art. 99 by the Amsterdam Treaty. 4. Subsequently, the OMC has been adopted in education, youth policy, immigration, asylum, enterprise policy, research and development, information society, economic reforms, innovation, and sustainable development (Rodrigues 2003; Laffan and Shaw without year: 13f.). See the following EU Commission communications for the application of the OMC in the following areas: youth (Commission of the European Communities 2001c); asylum policy (Commission of the European Communities 2001b); immigration (Commission of the European Communities 2001a); and innovation (Commission of the European Communities 2003). See also the articles in the second issue of the Journal of European Public Policy 2004, some of which deal with the application of the OMC in new fields, e.g. Kaiser and Prange (2004) for the OMC and innovation policy, De la Porte and Nanz (2004) for the OMC and pension policy and Caviedes (2004) on the OMC and immigration policy. 5. These social policy articles had previously been annexed to the Treaty as the ‘Protocol on Social Policy’ because Great Britain opposed their integration into the Maastricht Treaty in 1991. 6. For discussion of EU social policy competencies and more details of EU social policy provisions see Falkner (1998), Geyer (2000), Hantrais (2000), Kleinman (2001) and Leibfried (2005). 7. See TEC Art. 137, 1, a–k; Art. 137 2, a. 8. See TEC Art. 137, 2, b. 9. This applies to the issues of pay, the right of association and the right to strike or the right to impose lock-outs (Art. 137, 5). 10. In some areas such as unemployment, disparities between regions have however been increasing throughout the last decades (Baddeley et al. 1998). 168

Notes

169

11. The overall EU budget amounts to only 1.00 per cent of the GDP of the whole EU in 2005. About one third of the EU’s expenditures were allocated to ‘structural operations’, in 2005 (ca. 32,396 Mio € ⫽ ca. 21,597 Mio £, see http://europa.eu.int/comm/budget/library/publications/budget_in_fig/syntc hif_2005_en.pdf, accessed 16.03.2006). 12. E.g. the removal of tariffs, other trade barriers, and regulations that can lead to a distortion of competition. 13. See the UNICE statements on social policy on http://www.unice.org/, accessed 28.03.2006. 14. A term already used by Adam Smith in his ‘Theory of the Moral Sentiments’, 1871.

2

Conceptualizing the OMC

1. I adopted this term from Visser who used the German term ‘eingeladene Gehorsamkeit’ to describe how the Dutch government ‘used’ the OMC in national policy-making (cf. Visser 2005: 199). 2. Both Committees were formally established in 2000, the Employment Committee has, however, several forerunners and has a Treaty basis since the Amsterdam Treaty. 3. The Europeanization approach also developed a typology of national responses to EU law. This typology can, however, not be directly applied to OMC research because the OMC is not legally binding. The Europeanization typology consists of ‘inertia’, ‘absorption’, ‘accommodation’, ‘transformation’ and ‘retrenchment’. Inertia means that there is an absence of change. If national policies become even more dissimilar to EU policies due to domestic resistance, Börzel calls it retrenchment. Absorption means that a member state formally adopts EU law but without any substantial impact on domestic policies and structures. Accommodation is a more intensive integration of EU law but still without a change of core aspects of policies, politics or the polity. Transformation is the highest possible degree of domestic change where previously existing national arrangements are replaced by EU-originated provisions (Radaelli 2003a: 37; Börzel 2005: 58f.). 4. This concept has been used by Börzel and others to describe a strategy of member states to limit the gap between EU policy approaches and domestic policies in order to minimize adaptation costs (Börzel 2002). 5. That contextual aspects play a role in actors’ responses to the OMC does not mean that these factors determine their responses. But the country specific context matters in framing the interpretation of the OMC as well as actors’ political interests and strategies. Exploring the role of different factors also does not aim at developing a theory which could explain and predict how actors respond to the OMC. Rather it serves to understand differences among countries that can be observed so far. 6. The character of international norms and laws is also taken into account in the compliance literature that seeks to explain successful or non-successful implementation of international law. The compliance approach analyses, for example, how precisely an international norm is formulated, whether the supranational body is authorized to issue such a norm and whether there are

170

Notes effective monitoring instruments and sanctions available at the international level (Chayes and Chayes Handler 1993; Neyer and Zürn 2001).

3

The ‘Third Way’ in European Social Policy

1. Examples are the new embrace of ‘social inclusion’ policies by the British conservative party under its new leader David Cameron and a the Blairinspired pro-welfare programme with which Fredrik Reinfeldt, leader of the Swedish conservative party, won the elections in September 2006. 2. The term ‘third way’ has been used before by different political movements, groups, or parties, in different countries and at different times. A prominent example is the notion of the ‘third way’ by democratic socialist movements in Eastern Europe, e.g. by Ota Šik. The ‘new social democrats’ do not refer to this movement but defined their approach in a new way (cf. Bastow and Martin 2003). 3. Cf. the following literature about the ‘third way’: Brütt 2001; Buckler and Dolowitz 2000; Clift 2001; Driver and Martell 2000; Geyer 2003; Giddens 1999; Giddens 2000; Jary 2002; Merkel 2000; Mouzelis 2001; Pierson 2004; Schröder and Blair 1999; SPD 1999. 4. A term that Tony Blair adopted although it had been used by the British Conservative Party before. 5. Before the integration of the Broad Economic Policy Guidelines and the Employment Guidelines, the former also included explicit recommendations for labour market, and partially, social policy. 6. Cf. also other author, who support such interpretation of the EES and OMC: Adnett (2000) and (2001); Ashiagbor (2005: 279ff.); Aust (2000); Deppe (2003); Kenner (1999); Jacobsson (2001: 7); Hemerijck and Visser (2002); Ostheim (2004: 385); De la Porte and Pochet (2004: 75); Visser (2000: 450); Visser (2002); Wincott (2003). 7. The issue of including more quantitative targets into the guidelines was a very important and contested point in the negotiations on the new set of guidelines. In the end, fewer quantitative targets were included than originally proposed by the Commission (cf. for the process of negotiations on the 2003 set of guidelines: Jobelius (2003)). 8. Apart from these general indicators ‘quality of work’ is mainly measured by transitions between unemployment and employment, growth in labour productivity (based on the assumption that labour productivity increases if the quality of work increases), employment and unemployment gender gaps, gender pay gaps and gender segregation, labour market gaps for disadvantaged groups, child care facilities, transitions into and within employment by pay levels, transitions into and within employment by type of contract, the diversity of contractual and working arrangements, accidents at work, participation in education and training (Employment Committee 2005). 9. See for literature on the social inclusion and social protection OMCs: Begg et al. 2002: 311; De la Porte 2002a; De la Porte 2002b; De la Porte and Pochet 2002a; Ferrera et al. 2002; Myles 2002; Deken de 2003; Sommer 2003; De la Porte and Nanz 2004; Kröger 2004; Zeitlin et al. 2005).

Notes

4

171

Institutions and Actors

1. As pointed out in Chapter 2 there are severe methodological difficulties in examining the role that the OMC played for national social policy development. In Chapter 2 I proposed to focus on the responses to and usage of the OMC by domestic policy actors instead of examining the OMC’s ‘influence’ on policy-making in a strict sense. This study’s sources for empirically investigating policy actors’ responses to the OMC are expert interviews and official documents. I conducted over 70 interviews with political experts from Germany, the UK and the EU Commission. The interviews provided background information about how politicians interpreted the EES and how they perceived its role for domestic policy-making. Secondly I studied the course of labour market policy development and analysed whether policy approaches akin to the EES appeared at the member state level before or after they had been communicated through the OMC framework. Thirdly, I examined over 800 policy documents from Germany and the UK in order to find out whether or not policy makers referred to the EES to legitimize domestic policy change. 2. In form of ‘training, retraining, work experience, a job or other employability measure’ without counselling (European Commission 2006c: 57). 3. See Chapter 5 regarding the conflict between the EU Commission and the UK government in relation to the definition on goal achievement of these ‘new start’ targets. 4. It must be noted, however, that the member states can negotiate bilaterally with the Commission on the formulation of the EES recommendations. It is therefore possible that policy plans of governments have an impact on the EES recommendations if the government welcomes additional external support for domestic policy reforms. 5. Clause IV of the Labour Party constitution contained a commitment to ‘common ownership of the means of production, distribution, and exchange’. This was replaced by the description of the Labour Party as a ‘democratic socialist’ party which aims to create ‘a community in which power, wealth and opportunity are in the hands of the many, not the few’. 6. In 2005 the National Action Plans for employment have merged with the annual reports in economic co-ordination into the new ‘National Reform Programmes’. Since the empirical research on which this section is based was conducted in 2003 and 2004, the term ‘National Action Plan’ is still used. 7. In the 2003 NAP, however, a footnote was inserted on the pooling of unemployment assistance and social assistance, expressing the diverging positions of the unions and the employer organisations (Federal Republic of Germany 2003: 30, footnote 7). 8. The UK refused to become a member of the European Coal and Steel Community (ECSC) in 1951, negotiations to enter the EAC were withdrawn and the Treaty of Rome was not signed. Also later, the processes of accession into the EC were difficult. The first applications for accession in 1961 and 1967 was opposed by De Gaulle. Only after De Gaulle had retired and after new negotiations had taken place on the rules of financing the EU budget, the UK accessed (together with Ireland and Denmark) in 1973. Struggles about the EU budget, the European agricultural and structural policies continued after accession of the UK, because the UK was in the position of a net payer,

172

Notes opposing the advantages the core member had secured for themselves before. (In the early 80s a share of contributions was paid back to the UK.)

5

The EES in Germany and the UK

1. These changes were introduced through the Act on Corrections to Social Security Insurance and Securing the Rights of Employees (Gesetz zu Korrekturen in der Sozialversicherung und zur Sicherung der Arbeitnehmerrechte) that came into force in January 1999. Through this act, dismissal protection again applied to enterprises with five and more employees (instead of ten as before) and in case of sickness 100 per cent of previous income was paid which had been cut to 80 per cent before). 2. The Second Reform Act of Social Security Code III (Zweites SGB III Änderungsgesetz) that was introduced into parliament in April 1999 and came into force in August 1999. 3. This is also known as the abolishment of the so-called ‘original unemployment assistance’. The act that led to this change is called the Third reform act of Social Security Code III and was adopted in December 1999. 4. The Hartz-Commission consisted of 15 members and was headed by P. Hartz, chief of personnel of Volkswagen. Furthermore, the Hartz Commission members were representatives of companies and employers, banks, political consultancies, trades unions, one city mayor, and academics. 5. These conditions are: ‘Claimants must have paid Class 1 contributions on earnings 25 times the lower earnings limit in either of the two complete tax years before the start of the benefit year in which the claim is made, and in each of these must have paid or been credited with contributions on earnings 50 times the lower earnings limit’ (Bottomley et al. 1997: 2, footnote 2). 6. The ‘Back to Work Bonus’ means: If a claimant finds part-time work after three months of unemployment, half of the additional earnings (up to a limit) is credited to the claimant’s bonus scheme and paid out in a tax-free lump sum when the claimant finds a job and stops receiving benefits. 7. The manifesto presented the plan to finance the New Deal programmes by a windfall tax on excessive profits on previously public but now privatised utilities. According to this budget, 5.2bn £ should be raised for these programmes, of which 2,550m or 70 per cent should be spent for the ND for Young Persons and 530m or 15 per cent for the ND for Long-Term Unemployed, as well as smaller sums for ND programmes for other target groups (according to the 1999 budget, cf. Finn 1999). 8. Jobcentre Plus is now responsible for claims of the following benefits: Jobseeker’s Allowance, Income Support, Incapacity Benefit, Severe Disablement Allowance, Maternity Allowance, Bereavement benefits, Industrial Injuries Disablement Benefit, and Invalid Care Allowance (cf. Job Centre Plus 2002: 4). 9. Other labour market policy measures presented in the UK NAPs can be mentioned: for example Jobclubs; worktrials (work with an employer for a certain amount of time while still receiving benefits); and ‘employment zones’, which were introduced in April 1998 according to a commitment in the Labour Party manifesto. In employment zones, money available for training and for benefits is combined in personal job accounts so that it can be spent

Notes

10. 11.

12.

13.

14.

15.

16.

17. 18.

19. 20.

21.

173

more flexibly than in the ND programmes, for JSA and non-JSA claimants and those unemployed for over twelve months. Cf. for a detailed description of employment zones and criticism on the employability/workfarist agenda behind them see Haughton, et al. 2000. The rate for workers aged over 22 will raise to £ 5.35 per hour, £ 4.45 for workers aged 18–21, and £ 3.30 for those aged 16–17. See the following draft laws: Second Reform Act of Social Security Code III (Deutscher Bundestag 1999b), the Job-AQTIV Act (Deutscher Bundestag 2001b), Hartz-Act I (Deutscher Bundestag 2002a), Hartz-Act II (Deutscher Bundestag 2002b), Hartz Act IV (Deutscher Bundestag 2003b). After 2002, the Bundesrat decided to dispense with a discussion. See the following Bundesrat plenary discussions: Bundesrat (1998b; 1998a; 1999a; 2000c; 2001a; 2002d; 2003c; Bundesrat 2004). Cf. the following draft law of Bayern (Bundesrat 2002c) and of the CDUmajority Bundesrat motion (Entschlieb-ungsautrag) indirect references to the EES (Bundesrat 2002b); cf. the following draft laws and motions of SPDgoverned Länder with references to the EES: a draft law of Saarland (Bundesrat 2000b: 5), a motion by Nordrhein-Westfalen (Bundesrat 2003a: 3). Schleswig-Holstein also issued a draft law on job-rotation in 2001 in which experiences in Denmark were named as best practice and references to the Lisbon conclusions were made (Bundesrat 2001b: 4f.). An exception is the Committee report of the Scottish Parliament on the EES (The Scottish Parliament and European and External Relations Committee 2003). See the following documents by the Welsh Assembly Government (2002), Welsh Assembly Government (2004), The Scottish Office (1998) and the Scottish Executive (2003). See, for example, for the Confederation of German Employers BDA (1999), BDA (2001a), BDA/BDI (1997), BDA/BDI (1998b), BDA/BDI (1998a); for the German Federation of Trade Unions DGB (1998b), DGB (1999b), DGB (2002), DGB (2003b), DGB (2004). See DIHK (2002); DIHK (2003); DIHK (2004a). This occurred in NAPs of the following years: 1998 (United Kingdom 1998: 14f., 31f.), 1999 (United Kingdom 1999: 15f., 38f., 41f.), 2000 (United Kingdom 2000: 27f.) and 2003 (DWP 2003: 16ff.). See footnote 16 and DGB (2000), DGB (1999a). For example by the Confederation of German Employers’ Associations (BDA 2002d), the German Chamber of Industry and Commerce (DIHK 2004b) and the Confederation of British Industry (CBI 2000). Examples for this type of reference occur in the following documents: BDA (2001b) which is a statement on Job AQTIV; BDA (2002e) on the HartzCommission; BDA (2002a); BDA (2002c) which is a statement on the Hartz Acts I and II, supporting ‘active ageing’; BDA (2002b) on the Hartz proposal, advocating ‘active ageing’; the BDA in Deutscher Bundestag (2003a: 30) on the draft law “Reforms on the Labour Market” supporting the deregulation of labour law; BDA (2003) requesting flexible and deregulated labour markets. In some of these documents the references to the EES are indirect, for example by using the expression: ‘The EU Commission criticises since a long time . . .’.

174

Notes

22. The NAPs were mostly on the agenda for discussion together with other current issues, for example with the Lisbon Council preparations in 1999 and with the Job AQTIV Act in 2001 (cf. Deutscher Bundestag 1998; Deutscher Bundestag 2000c: 9116; Deutscher Bundestag 2001a: 19530; Deutscher Bundestag 2002c: 25390).

6

Effectiveness

1. Particularly the economic goals embodied in common market and competition law, the monetary union and the Stability and Growth Pact, but also in the most relevant parts of the Lisbon Strategy. 2. The Berlusconi government in Italy was however succeeded by the centre-left Prodi government in May 2006. 3. This overarching aim is mentioned in slightly different formulations in several Council conclusions. While the Lisbon conclusions only mention the ‘modernisation of the European Social Model’ (European Council 2000b: para 5, 24), the Nice conclusions contain the formulation ‘reinforcement and modernisation of the ESM’ (European Council 2000a: para 15). The Social Agenda, which was also annexed to the Nice conclusions, refers to ‘modernising and improving’ and ‘strengthening and modernising the European Social Model’ (European Council 2000a: Annex, Social Agenda). 4. See the compendium on EES indicators on webpage http://www.europa.eu. int/comm/employment_social/employment_strategy/docindic_en.htm, accessed 1 Dec 2005. 5. To be precise, the overarching objectives are covered by 26 indicators, the social inclusion objectives by 25 indicators, the pension objectives by 27 indicators and the health objectives by a range of objectives that still need to be approved. 6. Source: Council of the European Union (2006a: 11). 7. No data are available for the EU-15 and EU-25. The quote stems from the Council of the European Union (2006a: 10). 8. Regarding the 6 month target, 11 member states delivered data in 2004 and 10 of them did not achieve the goal. Regarding the 12 month target, 10 member states provided data in 2004 and 9 of them did not reach the target (European Commission 2006c: 56). 9. The Gini coefficient is based on the Lorenz curve which demonstrates the distribution of the cumulative share of income in the population. If income distribution were totally equal the Lorenz curve would be a 45° line. The greater social inequality the more the Lorenz curve is bent downwards. The Gini coefficient takes the extent of the area between the 45° line and the Lorenz curve and calculates the proportion between this area and the whole triangle covered beneath the 45° line. If there is perfect equality this ratio is 0 per cent, and if there is perfect inequality, that means if one person receives the income of the whole society, it is 100 per cent. 10. The coefficient of variation is calculated by dividing the standard deviation, e.g. on employment rates of the EU-15 member states in 1997, by the mean of the employment rates of the same set of member states. If one calculates the coefficient of variation for each year between 1997 and 2005 one can see

Notes

11.

12.

13. 14. 15.

16.

7

175

whether this coefficient is increasing or declining over time. If it is declining, employment rates of the member states become more similar during this period. ␴-convergence can also be examined by the standard deviation which measures the accumulated gaps between the performance of single units (e.g. states or regions) and the average performance of a set of units (e.g. EU-15 average) at a certain point in time. It does not take into account, however, the level of, for example unemployment rates, which makes a comparison of different datasets difficult. The coefficient of variation simply divides the standard deviation of a set through the mean of this set. ␤-convergence of, for example, employment rates is measured by correlating the employment rates of time i with the growth of employment rates in a certain period of time ((time i) ⫺ (time i ⫹ x)). The assumption is that convergence takes place if employment in countries with high employment rates grows slower than in countries with low employment rates which is indicated by a negative correlation between the two factors (Baddeley 2002: 160). The gap-test is calculated by correlating the gap between the performance of the individual countries in the examined set and the average of this set at time i with the same gap at time i ⫹ x. If relative positions within a set have not changed significantly, a persistence in the ‘distribution’ of inequality is said to exist: low performers were then not able to approximate or even ‘take over’ those who were better performers at time i which is indicated by a strong positive correlation between the two factors (Baddeley 2002: 162). NUTS stands for ‘Nomenclature of Territorial Units for Statistics’. For example in Italy, Poland, Latvia and Sweden (Council of the European Union 2006a: 14). This argument does not imply that EU law is always effectively implemented at the national level. Rather it indicates simply that EU law has a better chance of being effective than legally non-binding rules and benchmarking practices. In economic policy coordination guidelines are set up, the so-called Broad Economic Policy Guidelines (BEPGs). These guidelines are released together with the employment guidelines in the ‘Integrated Guidelines’ package since 2005.

Legitimacy

1. The most important of which is the EAPN (European Anti-Poverty Network), others are FEANTSA (the European Federation of National Organisations Working with the Homeless) and ATD Fourth World (ATD stands for ‘Aide à Toute Détresse’ an international organization of people experiencing extreme poverty founded in Paris in 1957). 2. However, both criteria, transparency and accountability, are part of the list of ‘good governance’ criteria in the EU’s White Paper on governance (Commission of the European Communities 2001d: 10). 3. See for the Employment Committee: http://ec.europa.eu/employment_ social/employment_strategy/emco_en.htm and http://ec.europa.eu/ employment_social/social_protection_commitee/index_en.htm for the Social Protection Committee, both accessed on 1 August 2006. 4. The opaqueness of the OMC processes has also been bemoaned by other authors such as Amitsis et al. (2003: 69), Berghman and Okma (2002), Friedrich (2006) and Jacobsson (2002).

176

Notes

5. De la Porte and Nanz (2004), for instance, derived five criteria from theories on democratic legitimacy: transparency, public debate, participation, learning, and responsiveness. It is a bit astonishing that criteria such as representativeness, checks and balances and accountability are missing. 6. Directly integrating ‘civil society actors’ in decision-making also seeks to ‘civilize’ these groups which otherwise bear a certain potential for conflict between the institutionalized sphere of politics and citizens. In the White Paper on European governance it is, for example, explicitly requested that these civil society groups adjust themselves to the requirements of participation, and that direct participation must not mean an ‘institutionalisation of protest’ (Commission of the European Communities 2001d: 15). 7. Fung and Wright acknowledge this problem by stating ‘the likelihood that these institutional designs will generate desired effects depends significantly upon the balance of power between actors engaged in EDD [empowered deliberative democracy, M.B.]’ (Fung and Wright 2001: 24).

8

Conclusion

1. Particularly the second option regarding a legally binding framework for the OMC has already been discussed in the literature (Scharpf 2002). See for a discussion on further reform proposals Zeitlin (2005b: 483ff.). 2. This is a similar but slightly more ambitious proposal than Zeitlin’s (2005b) ‘reflexive reform strategy’.

Appendix 1. The OMC inclusion interviews were conducted by Dawid Friedrich whom I thank for the permission to use this material.

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Index accountability 20, 98, 134–5, 146–7, 156–8, 175 activation 21, 41, 44, 47, 55, 74–9, 81, 102, 109, 115, 123 actor constellations 36, 59–60, 64–5 ageing, see demographic change agenda setting 29, 156–7 Atkinson, Tony 116 Austria 101 authority of member states 2–3, 13, 19–20, 98, 117, 143, 152, 156 autonomy 1, 13, 15 see also authority Baldwin, Peter 43 Belgium 101 benchmarking 22, 33, 35, 49, 82, 115, 136 best practices 22, 25, 29, 102, 148 Blair, Anthony 76, 170 blaming 22–3, 26, 32, 156 bottom-up and/or top-down 14, 19, 21–3, 26–8, 38, 156 business interests 8–9 see also social partners Cameron, David 170 causality 59, 102, 169 checks and balances 138, 176 childcare 60–1, 111 citizenship 41, 128 civil society 40–1, 130–1, 133, 145, 148, 150, 176 Clasen, Jochen x Classical Community Method 4–5, 27–31 coefficient of variation 118–20, 174–5 Cohen, Joshua 136 comparison 14, 22, 34, 38, 49, 55, 59–60, 64, 67, 72–94, 103, 106, 114, 116–17, 120 competition 4, 10, 105–6, 140, 145 compliance 23, 31, 34, 169

conditionality 41, 76–7 Confederation of British Industry 67, 87, 166 Confederation of German Employers’ Organisation (BDA) 86–7, 166 constitution 139 constitutionalization 136 Constitutional Treaty, see Treaty of the EC constructivism 149–50 convergence 2, 12, 45, 51, 98, 117–23, 129, 153, 175 coordination 10–13, 126 of economic policy, see economic policy coordination among policy actors 101 of social security systems 6 Council of the European Union 27–30, 126, 144 courts 136–7 credit claiming 32 decentralization 122, 136, 143, 148 De la Porte, Caroline 60 deliberation 23–5, 134, 136–7, 139, 148 demand-side approach, see supply-side approach democracy, model for the EU 12, 98–9, 130, 135 demographic change 11, 52, 120 Denmark 101, 105, 145 depoliticization 115 deregulation 84, 87, 101, 103–4, 173 diffusion 22, 69, 123 directly-deliberative democracy 98, 130, 135–40 disability 41, 48, 78–9, 90, 112, 116 discourse 23, 64–5, 91–2, 94 diversity 8–9, 28, 136–7 early retirement 81, 85, 90, 103, 122 early school leavers, see education eastern enlargement 153, 159 200

Index economic policy coordination 4, 45–6, 126, 145, 154, 170 education 62–3, 83, 90, 93, 108–9, 111, 113, 115, 122 effectiveness, of the Open Method of Coordination, see Open Method of Coordination Eichel, Hans 74 electorate 2, 32, 37, 64–5, 70, 73, 90, 92, 94, 103, 107, 134–5, 141, 144, 146, 156–6 see also public employability 47–9, 81, 104, 123 employer organizations, see social partners; business interests Employment Committee 28–9, 100, 107–8, 134–5, 169, 175 Employment Task Force 108 employment rates 49, 50–1, 60–3, 82, 107–10, 115, 118–19, 121–2, 124, 153, 174–5 equal opportunities, see gender equality Eurobarometer 141 European Central Bank 10 see also European Monetary Union European Commission 27–31, 126, 144, 171 European Council 5, 12–13, 28–30, 45, 47, 52, 120, 126, 143, 158 European Court of Justice (ECJ) 10, 27 European ‘demos’ 9–10, 97, 147 European Employment Strategy 108–11, 116, 126, 129, 132–3 history and development 6, 12, 47–8 instruments 28, 45–9 pillars 48, 104 Europeanization 33–4, 36, 38, 59–60, 71, 169 European Monetary Union 4–5, 10–1, 33, 45, 88, 93, 122, 125–7, 129, 145, 153–5, 159 European Parliament 27–30, 97, 132, 150, 158 European social fund, see structural funds European social law 6–7, 27

201

European Social Model 14, 42–4, 106–7, 120, 153, 174 see also third way European social policy 3–6, 13, 141, 156, 168–72 binding provisions 5, 7–8, 13, 142 dilemma of 1–2, 6–8, 7–13, 97 history of European Union social policy 6–8 evaluation 22, 28, 49, 113, 130 criteria for evaluating the OMC 97–100 experimentalist governance, see directly–deliberative democracy experts 2, 14, 19, 25, 29, 134–5, 144, 149–50, 171 financial sustainability 44, 54–6, 106, 108, 114, 122 Finland 105 fiscal policy, see European Monetary Union flexibility 27, 30, 82, 87, 103–4, 136–7, 145 economic and/or labour market 41, 47–8, 51, 62, 82, 84, 87–8, 93, 100–1, 104, 155, 173 ‘flexicurity’ 47–8, 51, 88, 93, 100–1, 104, 113, 123, 145 framing, see policy frames France 21, 101–3, 105, 142, 155 Friedrich, Dawid 176 full employment 41–2, 50, 104, 107, 115 gender equality 6–7, 48, 108 German Federation of Trade Unions (DGB) 86–8, 165–6 Germany 102–6, 115, 123, 128, 145 case selection 14 government 62, 64–5, 67–9, 73, 79–82, 91, 102–3, 163–4 labour market performance 60–62, 71, 90 labour market policy 62–3, 72–6, 90 Länder 64, 67, 80, 84–6, 88, 166–7, 173 political system 64–9, 71, 91, 94

202

Index

Germany – Continued public employment agency 75 role of OMC 82, 84, 89–94 social partners 65–7, 86–9, 91–2, 94, 165–6 unemployment benefit system 74–5 Gerster, Florian 75 Giddens, Anthony 39–41 gini coefficient 112, 174 ‘goodness of fit’ 34–6, 38, 59–63, 70–1, 90–2, 103 governance 20, 24, 26, 33, 48, 54–5, 93, 101, 131, 138, 140, 159, 175–6 methods in European Union 2, 4–5, 19, 130 soft governance 3–4, 14, 19 White Paper on governance 27, 131, 175 see also multi–level governance governments 1–3, 8–15, 19–24, 26, 30–37, 39, 51, 97, 101, 103, 105, 114, 117, 127, 132, 134–5, 144–5, 149, 154–6, 158, 160, 163–4 Greece 105 guidelines in the OMC 28, 45–50, 52, 104, 111, 132 hard law, see soft law harmonization of social policy 2–3, 12, 51 Hartz reform 72, 75–6, 81, 90, 105, 172 human capital 47, 113 identity, political 9–12, 23, 146–7 see also European ‘demos’ implementation 19, 29, 67, 73, 103, 105, 109, 137, 156 inactivity 47, 62–3, 79 income inequality 112, 114 see also social inequality indicators, see targets, quantitative and indicators information, exchange and provision of 24, 69, 142, 153, 157 input legitimacy 146–7, 150–1, 158 see also output legitimacy institutionalism 25, 121

see also path dependency interests 8–9, 13, 19, 21–2, 26, 28, 30–1, 38, 70, 86, 91, 93, 105, 139, 146, 149–50 International Monetary Fund (IMF) 5 intervening variables 34–8, 59–71 interviews 161–3, 171 ‘invited dutifulness’ 26–7, 156–7 see also two–level game Ireland 102–3, 128 Italy 101, 105, 174 Jagoda, Bernhard 75 JobCentre Plus, see United Kingdom, public employment agency job creation 41, 74 jobless growth 11 Jobseeker’s Allowance, see United Kingdom, unemployment benefit system joint Commission and Council reports 29, 104–5, 108–9, 112–13, 108–13, 121, 133 Joint Employment Report, see joint Commission and Council reports Kaelble, Hartmut 43 Keynesianism 40–1, 74 knowledge economy 12, 40, 44–6, 52, 124 Kok, Wim 108 labour costs, non–wage 10, 62–3, 103, 122 labour market integration 42, 52, 81, 103, 112, 122, 127 see also social inclusion Lafontaine, Oskar 74 legislature, see parliaments legitimacy of the European Union 2, 12, 98, 131, 136, 141, 143,146–51, 153 of EU social policy 9–10, 97 of the Open Method of Coordination 15–16, 20, 98, 114, 130–51, 142, 152 of policy-making processes 2, 9, 27, 29, 130, 134–5, 150, 157–8

Index legitimization 69–71, 84, 90–3, 102–3, 105, 145 see also legitimacy; blaming lesson drawing, see policy learning life long learning 47–8, 60–1, 63, 76, 111, 113 see also education Lisbon Strategy 12, 51–2, 93, 105–6, 108, 124, 126, 129, 145, 154 logic of appropriateness 23 long term unemployment 60–2, 73, 77, 81, 89, 109–11 low wage sector 41, 50, 74, 113 Majone, Giandomenico 147 making work pay 21, 47–8, 74, 79, 93, 121 management by objectives 136 market-making, see negative integration media 23, 88–9, 92, 135 methodology, see research methods mimicking 22–3, 25–6 minimum wage 79, 173 monitoring 5, 28, 35, 52, 54, 77, 114 see also evaluation Moravcsik, Andrew 147 multi–level governance 5, 27, 152, 156, 158, 160 National Action Plans 29, 37, 66–7, 73, 70–80, 86, 88, 91, 105, 133, 135, 157, 171 national parliaments 29, 31, 68, 82, 88–9, 100, 132, 145, 147, 150, 156–8 National Reform Programmes, see National Action Plans National Strategy Reports, see National Action Plans negative integration 1, 7, 20–1, 100, 123–9, 153, 169 neo-liberalism 40, 76, 145 Netherlands 101–2, 105, 142, 155, 169 networks 23–5, 133–4, 143–4, 148, 156–7 New Deal Programmes 78, 83, 90, 172

203

New Labour, see new social democrats Non Governmental Organizations (NGOs) 29, 37, 65–6, 132–3, 145, 147 Open Method of Coordination (OMC) as a catalyst 38, 82, 84, 93, 102, 123, 129 as a compromise or ‘middle way’ 2, 12, 19, 26, 152 effectiveness 15–6, 20, 89, 93, 100–129, 147–8, 152 and the European Social Model 44 history and development 4–5, 12, 45, 47, 51–2, 157–60 influence of 19–21, 31–3, 38, 59, 82, 89, 93, 103, 114–15, 123, 141; influence on national governance 20–1, 101 interpretation of objectives 33, 80–1, 124 legitimacy of the OMC, see legitimacy new governance method 1, 3–5, 130–1, 159–60 non-bindingness vs. bindingness 1, 3–4, 15, 19–20, 26, 28, 31, 33–5, 80, 90, 93, 123, 125–6, 154, 157–8, 176 policy content of 39, 44–56 references to OMC in national policy-making 33, 80–94, 102, 106 refusing or denying the OMC’s influence 32–3, 83–4, 89–90 reiteration, of OMC processes 23–4, 30 as a response to dilemma of European social policy 1, 6–8, 12–3, 97 sanctions 19–20, 31, 34, 106, 125 in social inclusion and protection (pensions, health and longterm care) 28–9, 51–6, 106–8, 110, 122, 133, 142, 170 tension between OMC goals 50, 98, 100, 143, 152 and timetables 22, 28, 68 Offe, Claus x, 43

204

Index

older workers 41, 49, 53, 61, 63, 78, 81–2, 90, 103, 108, 111–14, 118, 120, 153 Organisation for Economic Cooperation and Development (OECD) 5, 102 output legitimacy 8, 11, 97, 131, 141, 146, 148, 150–1, 155 parliaments 136, 146, 159 see also national parliaments; European Parliament participation 41, 130–6, 138, 147–8, 150, 153, 156 see also partnership model partnership model 37, 48, 67, 131 see also social partnership path dependency 8, 121, 123, 155 peer pressure 22–3 peer review 28, 89 pension systems 53, 100, 102, 108, 113–14, 122 performance 5, 8, 14, 28–9, 34–6, 45, 49, 53, 59–61, 63, 71, 75, 103, 107–9, 114, 117, 175 persuasion 25 Pochet, Philippe 60 policy learning 22–5, 29, 100, 139, 156 policy transfer, see policy learning political parties 64–5, 84–5, 144, 164–5 response to OMC 79–84 political system 36, 86, 91–2, 103 veto points 36, 64, 71 policy frames 101–2, 123, 129 positive integration, see negative integration post-modernity 136 poverty 42, 52–6, 104, 106–8, 112–15, 122, 127–9, 141, 145, 153 power 138–9, 145, 148 prevention 48, 54–5, 62, 73, 75, 81, 102, 123 principle of subsidiarity 6, 19, 100, 117, 125, 130, 140, 142–4, 150 productivity 46, 50–1, 113, 122 public 23, 69–71, 92, 94, 134–5 public opinion, see public

quality of work 50, 104–6, 108, 113, 116, 127, 170 race-to-the-bottom, of social standards 1, 10–12, 153 Radaelli, Claudio 34 rationality 24–25 recommendations 4, 51–2, 62–3, 79, 83–4, 89–90, 144, 146 redistribution 15, 147–8 and European Union social policy 7, 97 reflexive modernity 40 regional and local authorities 29, 48, 131, 148, 166–7 regions 108, 120, 139, 168 also see regional and local authorities; Germany; United Kingdom regulative policies 4, 6–7, 19, 147, 149 relationship, between EU and member state 37–8, 69–71, 91–2, 103, 171 representativeness 138, 140, 176 reputation 23–4 research methods 14, 20, 31–2, 33–8, 115–18, 169, 171 rights and responsibilities, see activation risk society 128 rule of law 136, 138 Sabatier, Paul 24 Sabel, Charles 136 sanctions, see Open Method of Coordination, sanctions Scharpf, Fritz 147–8, 157–8 Schmidt, Vivian 64–5 Schröder, Gerhard 74 Scottish Parliament 84, 173 self-regulation 24, 40–1 separation of powers shaming 22–3, 114 single market 1, 11, 33, 126, 128, 154, 156 see also negative integration skills, see education social authoritarianism 127

Index social democrats 12, 14, 40, 65, 74, 154, 171 new social democrats 39, 65–6, 75–6, 78, 83 traditional social democrats 63, 73–4, 81 social Europe 2, 10–12, 20, 26, 104, 106, 124, 130, 145–8, 152–4, 157 see also European social policy social exclusion, see social inclusion social inclusion 42, 44, 108, 115 see also labour market integration social inequality 108, 112, 114, 127, 129, 139, 145, 153, 155 socialization 23, 26 social partners 29, 27, 48, 65–7, 86–8, 91–3, 103, 105, 131–4, 144–5, 165–6 see also Germany, United Kingdom social partnership 66–8, 79, 83–4, 89, 104 social problems 149 social protection 51–6, 106, 155 Social Protection Committee 28–9, 100, 107–8, 111, 134–5, 169 soft law 5, 19–20, 26, 153, 159 Spain 128 Stability and Growth Pact (SGP), see European Monetary Union stakeholders 54, 131–3 structural funds 7, 69–71, 85, 92, 113 subsidiarity, see principle of subsidiarity supply-side approach 41, 44–5, 48, 87, 105, 123, 128 Sweden 102, 105, 145 targets, quantitative and indicators 22, 28, 48–50, 52–3, 55, 60–2, 93, 100, 107–17, 126, 141, 146, 153, 157, 170, 174 tax credits 79 tax policy 102, 105, 155 Taylor-Gooby, Peter 128 Thatcher, Margaret 76 third way 14, 39–42, 48, 51, 55, 63, 74, 78, 103, 106–7, 125, 127–9, 148, 154, 170

205

and the role of the state 40 top-down, see bottom-up trade unions, see social partners Trades Union Congress (TUC) 67, 86, 165–6 transparency 20, 98, 100, 116, 131, 134–5, 144, 146–7, 175–6 Treaty of the European Communities (TEC) 27, 28, 52, 67, 101, 125, 130, 140–1, 147, 150 Trubek, David 22 Trubek, Louise 22 trust 10, 25 two-level game, and the Open Method of Coordination 13, 19–21, 31, 38, 102, 156 unemployment 13, 45, 62, 74–5, 77, 119–20, 127, 141 see also long-term unemployment; youth unemployment unemployment benefit system 41–2, 51, 72, 74–8, 172 United Kingdom 105, 115, 171 case selection 14 devolved regions 64, 68, 85–6, 166–7 government 39, 62–5, 67–9, 82–4, 91, 163–4 labour market performance 60–2, 71, 90 labour market policy 62–3, 76–9, 90 political system 64–9, 71, 91 public employment agencies 78–9, 121–2, 172 role of OMC 84, 89–94 social partners 65–7, 83–4, 86–8, 91–2, 165–6 United Nations 102 United States 40, 129, 154 ‘uploading’ 26, 30–1, 33, 38, 84, 90, 92 varieties of capitalism 14 Visser, Jelle 105, 169 vocational training, see education

206

Index

wage bargaining 10–11, 45, 47, 87, 89, 149 welfare state 13, 155, 159 regimes 14, 120–1, 123 retrenchment 1, 12, 155 welfare-to-work 76–7 see also activation

window of opportunity workplace safety 6 youth unemployment 109–10 Zeitlin, Jonathan

25, 90, 154

60–2, 73, 77,

101, 135