Flexicurity in crisis: European labour market policies ... - SAGE Journals

474749 2013

EJD19110.1177/0959680112474749European Journal of Industrial RelationsHeyes

Article

Flexicurity in crisis: European labour market policies in a time of austerity

European Journal of Industrial Relations 19(1) 71–86 © The Author(s) 2013 Reprints and permission: sagepub. co.uk/journalsPermissions.nav DOI: 10.1177/0959680112474749 ejd.sagepub.com

Jason Heyes

Sheffield University, UK

Abstract This article compares labour market policies implemented by EU member states in response to the economic crisis that erupted in 2008. It also considers the implications of the crisis for the European Commission’s flexicurity agenda. The discussion focuses on Ireland, the UK, Germany and the Czech Republic. The article demonstrates that responses to the crisis have been shaped by established features of national employment regimes in the four countries; but each employment regime is also affected by the implementation of austerity measures, which undermine conditions for implementing those components of flexicurity that have appealed most to trade unions.

Keywords Austerity, Czech Republic, EU, flexicurity, Germany, jobs crisis, Ireland, labour market policy, labour markets, UK

Introduction The economic crisis that began in 2008 caused a substantial shock in European labour markets. The average unemployment rate across the European Union (EU) increased from 7.1 percent in 2007 to almost 9 percent in 2009, with far larger increases in some EU member states (European Commission, 2010: 165). Governments responded by implementing measures to cushion the impact on the labour market and assist workers who lost their jobs. The European Commission encouraged governments to ensure that these measures were consistent with the principles associated with flexicurity, a concept that has increasingly shaped the Commission’s social policy prescriptions over the past decade (European Commission, 2009). This article has two purposes. First, it examines responses to the crisis in four EU member states and seeks to account for differences in the labour market policies pursued by their governments. Second, it considers the longer-term implications for the European Corresponding author: Jason Heyes, Sheffield University Management School, Mushroom Lane, Sheffield S10 2TN, UK. Email: [email protected]

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Commission’s ‘flexicurity’ agenda. Responses to the crisis have been influenced by established features of national employment regimes, but these regimes are also being reshaped as a consequence of government austerity measures. Austerity has encouraged attacks on social protections and given further impetus to workfare-oriented employment policy reforms. The weakening of social safety nets, coupled with renewed scepticism on the part of some governments about the desirability of employment protection, implies that securing a balance between flexibility and security that will be acceptable to governments, employers and trade unions will be even more difficult to achieve in the future. The article begins by discussing the emergence and content of the flexicurity concept and its implications for national ‘employment regimes’. This is followed by an examination of labour market policy responses to the economic crisis in Ireland, the Czech Republic, Germany and the UK and an analysis that seeks to account for differences in approaches. The article concludes with some reflections on the future prospects for flexicurity.

Flexicurity and national employment regimes The European Commission (2007: 10) has defined flexicurity as an ‘integrated strategy to enhance, at the same time, flexibility and security in the labour market’ and has claimed that the implementation of flexicurity measures will bring economic and social benefits, including enhanced productivity and smoother transitions within the labour market. However, despite its ubiquity, the meaning of flexicurity remains ambiguous (Burroni and Keune, 2011). The Commission has distinguished between ‘internal flexicurity’, involving more flexible labour utilization within an organization (e.g. through working time adjustments), and ‘external flexicurity’, which involves facilitating transitions in the labour market (into and between jobs). In practice, the Commission has tended to emphasize the latter form of flexicurity. A key area of uncertainty, however, is the extent to which flexicurity is compatible with robust employment protection legislation and measures that promote job security. While the Commission has insisted that ‘flexicurity’ does not imply that employers should be free to ‘hire and fire’, it has nevertheless claimed that restrictions on employers’ ability to dismiss workers can impede structural reform, efficiency improvements and job creation (European Commission, 2007: 12). Member states have thus been advised to increase labour market flexibility while simultaneously improving workers’ ability to make labour market transitions through active labour market policies (ALMPs) and lifelong learning measures that increase workers’ employability. Political considerations have encouraged the Commission to downplay implied threats to employment protections so as to appease flexicurity ‘sceptics’, including trade unions and some EU member states (Mailand, 2010), and secure their endorsement of the Commission’s four flexicurity components. These comprise: first, flexible and reliable contractual arrangements from the perspective of the employer and the employee, of ‘insiders’ and ‘outsiders’; second, comprehensive lifelong learning strategies to ensure the continual adaptability and employability of workers; third, effective active labour market policies that help people cope with rapid change, reduce unemployment spells

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and ease transitions to new jobs; and fourth, modern social security systems that provide adequate income support, encourage employment and facilitate labour market mobility. The four flexicurity components are intended to orient member states’ labour market policies, and are supplemented by ‘common principles’ that comprise policy objectives such as eroding segmentation and promoting gender equality. However, the Commission has emphasized that the specific content of the flexicurity agenda should be negotiated by governments and ‘social partners’ within individual member states. In practice, the extent of negotiation has been highly variable, reflecting differences in national industrial relations traditions. Close consultation over national labour policies has tended to occur only in member states that have experience of reaching national agreements on economic and social policy issues (Mailand, 2008). In Denmark and the Netherlands (countries that inspired the flexicurity concept), coordinated sectoral collective bargaining has played an important role in influencing the balance between security and flexibility across sectors (Shils and Houwing, 2010). The UK, by contrast, lacks the necessary institutional framework for such a negotiated approach. The Commission recognises that differences in industrial relations, employment rights and welfare entitlements across the EU mean that countries will begin their efforts to deliver flexicurity from different ‘starting points’. Gallie’s recent analysis of European ‘employment regimes’ is suggestive of the ways in which approaches to flexicurity might be expected to differ cross-nationally. The term ‘employment regime’ denotes a set of policies and institutions relating to work and employment, including the principles underpinning employment policies (such as the priority accorded to full employment) and the extent of welfare support for the unemployed. According to Gallie (2007), differences in the characteristics of employment regimes reflect variations in the strength of trade unions and the extent to which they are involved in labour market policy decisions: ‘inclusive’ regimes (such as Sweden) seek to maximize employment and extend employment rights across the labour force; in ‘dualist’ regimes (such as Germany), overall employment levels are considered less important and strong employment protections extend only to ‘core’ workers; ‘market’ regimes (such as the UK) provide minimal employment protection and benefits. Gallie’s account would appear to imply that union and employer involvement in shaping labour market policy, including flexicurity measures, through collective bargaining and social dialogue is likely to be greater in dualist and inclusive than in market regimes. In the latter, policy is likely to be determined largely by government. In dualist and inclusive regimes, trade unions might be expected to insist that flexicurity be pursued in ways that help sustain employment and social protection and promote lifelong learning. Strong employment protection might also encourage employers to improve ‘internal flexicurity’ as a way of controlling labour costs. In market regimes, by contrast, flexicurity can be expected to involve a greater emphasis on ‘external flexicurity’, given employers’ greater freedom to dismiss labour. However, the weakly regulated vocational training systems associated with economies with ‘market regimes’ cannot be expected to deliver anything approaching lifelong learning (Heyes and Rainbird, 2009). There are thus reasons to expect the components of flexicurity to be implemented in different ways across the EU. However, in recent years employment regimes have exhibited a number of common tendencies, which suggests that the scope for variation has

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narrowed. The deflationary bias of the ‘Stability and Growth Pact’, for example, has encouraged policy makers to view ‘social protection [as] a financial burden which blunts the competitiveness of enterprises and fuels the potential deficit’ (Bouget, 2003: 679). Furthermore, persistently high levels of unemployment have led many governments (with encouragement from the OECD and European Commission) to relax employment protection legislation and facilitate an extension of fixed-term employment, and to introduce workfare policies involving reductions in the duration of social benefits and steps to link entitlements to participation in the labour market (Van Berkel, 2010). The process has been uneven, and social protection within ‘inclusive’ and ‘dualist’ regimes typically remains superior to that in ‘market’ regimes. A tendency towards weakening social protection for the unemployed and the spread of ALMPs with a workfare complexion has nevertheless been apparent across all regime types. In some countries with dualist or inclusive regimes, these developments have also been associated with reductions in government expenditure on lifelong learning and reduced emphasis on education and training within ALMPs (Heyes, 2011).

Employment policies and the economic crisis Some of the tendencies that were apparent before 2008, in particular a weakening of social protection and the implementation of workfare-style policies, have been reinforced in some countries since the start of the economic crisis. The first phase of the crisis was marked by efforts to prevent widespread bank failures and economic collapse; governments injected fiscal stimuli involving tax cuts and/or increased public spending. Labour market measures mainly accounted for a relatively small proportion of stimulus spending when compared to tax cuts and transfers (Khatiwada, 2009: 18–19). However, governments made a number of interventions, some of which had implications for the components of flexicurity. Several countries attempted to reduce the scale of job losses and stimulate hiring activity through job subsidies and by cutting employers’ social insurance contributions. Measures relating to lifelong learning and ALMPs were also implemented. Training programmes for unemployed workers were introduced or extended and many countries provided public employment services with additional resources to support ‘job searching’. In countries with strong traditions of social dialogue, unions and employers had some influence over the content of emergency measures. Collective bargaining also took place in relation to job-saving measures, although again this mainly occurred in countries with strong traditions of sectoral or inter-sectoral bargaining (Rychly, 2009). Responses to the crisis were thus shaped by the institutional characteristics of national employment regimes. The defining characteristic of ‘phase two’ of the crisis has been fiscal austerity. Powerful supranational institutions, in particular the International Monetary Fund (IMF) and European Central Bank (ECB), credit-rating agencies and financial interests have encouraged a return to pre-crisis orthodoxy and the re-establishment of ‘sound finance’ through debt reduction. As the following examples will demonstrate, national employment regimes, and thus the components of flexicurity, are also affected by the drive to austerity. Of the four countries examined here, the UK and Germany provide examples of ‘market’ and ‘dualist’ employment regimes respectively. The other two countries

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occupy a more ambiguous position: while unions in Ireland and the Czech Republic are relatively weak organizationally, they nevertheless have a voice in policy-making through their involvement in national social dialogue. In addition to published sources, the discussion below draws on 40 semi-structured interviews conducted in 2010 with officials and representatives of the Czech Ministry of Labour and Social Affairs (Ministerstvo práce a sociálních věcí, MPSV), the CzechMoravian Confederation of Trade Unions (Českomoravská konfederace odborových svazů, ČMKOS), the Confederation of Industry of the Czech Republic (Svaz průmyslu a dopravy České republiky, SP), the German Federal Ministry of Labour and Social Affairs (Bundesministerium für Arbeit und Soziales, BMAS), Ireland’s Department of Enterprise, Trade and Innovation, Department of Education and Skills and Department of Social Protection, the Irish Business and Employers Confederation (IBEC), the Irish Congress of Trade Unions (ICTU), and the Department of Work and Pensions (DWP) and the Trades Union Congress (TUC) in the UK.

Ireland Ireland’s relatively weak employment protections and liberal welfare state (O’Connor, 2003) would suggest that it is a ‘market regime’. However, in contrast to the UK, employers, trade unions and the state have since 1987 participated in national tripartite social dialogue, which has led to a series of ‘partnership agreements’ incorporating national pay settlements as well as social policy goals. The agreements have served to shape Ireland’s employment model and its response to European Commission social policy proposals, including the supply-side issues that are central to the flexicurity agenda. The 2000–2002 Programme for Prosperity and Fairness, for example, contained proposals relating to lifelong learning and allowed for an increase in welfare benefits. The Irish rate of unemployment rose from 4.6 to 11.9 percent between 2007 and 2009, one of the highest crisis-induced increases in any EU country (European Commission, 2010: 173). To encourage firms to hire unemployed workers, the government introduced a one-year social insurance exemption and a temporary employment subsidy of €9100 per worker, as well as subsidies to encourage companies to recruit up to 750 of the 7000 apprentices displaced by the crisis. A labour market activation fund of €32 million was created in 2008 to support training programmes for the unemployed. The state employment and training agency FÁS (Foras Áiseanna Saothair) reoriented its training provision from long courses towards short duration ‘modules’, which enabled it to provide training opportunities to 160,000 workers in 2010 (as against 66,000 in 2008). However, overall funding for vocational training was not increased, resulting in reduced training opportunities for employed workers. While support for the lifelong learning component of flexicurity was therefore enhanced in one respect, it was weakened in another. Compared to the support offered the unemployed, measures to prevent job losses and support workers most at risk were minimal. Ireland had a short-time working scheme prior to the start of the crisis, albeit an inflexible measure: the only option was to operate a three-day week. The scheme was subsequently reformed to allow workers with reduced working hours to receive training on the two days on which they did not work. However, the pilot initiative involved only some 240 people, and officials estimated that by the end

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of 2010 no more than 4000 workers had participated in the (mainly short-duration) programmes (interview, Department for Education and Skills). The government response to the crisis has also had implications for employment protection and industrial relations. The 2006 national partnership agreement, Towards 2016, set out plans for a new labour inspectorate (the National Employment Rights Authority, NERA) and increased fines for breaches of employment rights. The NERA was established, but the number of labour inspectors subsequently fell as a consequence of spending cuts, and the introduction of increased penalties was indefinitely delayed. More significantly, social partnership collapsed following the government’s imposition of public sector pay cuts in late 2009. In addition, IBEC withdrew its support for a private sector pay agreement negotiated in 2008. The consequence was a return to company-level collective bargaining for the first time since 1987. In 2010 the government secured an €85 billion emergency rescue package from the IMF and ECB, in return agreeing to introduce further substantial spending cuts and social policy reforms. Austerity plans announced in November 2010 included a 12 percent cut in the minimum wage, increased taxes and reduced welfare expenditure, including changes to unemployment benefits. Following the general election of 2011, the minimum wage was restored to its former level, although employers’ social insurance payments in respect of low-paid workers were reduced by 50 percent. The improvements in social protection that occurred over the past decade have thus been partly eroded by fiscal austerity. However, the crisis does not wholly account for the reforms in social protection. A number of changes were informed by an OECD review of Irish ALMPs, initiated before the crisis began. The subsequent OECD report recommended a ‘more coercive approach’ to the unemployed, with tighter benefit conditionality rules and greater use of sanctions (Grubb et al., 2009: 130), and the government acted on these recommendations. In 2009 the rate of unemployment benefit paid to new claimants aged 18 to 19 years was cut from €204.30 to €100 per week, followed by similar cuts in 2010 for those aged 20 to 24. The maximum unemployment benefit for older workers was cut from €204.30 to €196, with provision to cut it further to €150 per week where job offers or activation measures were refused. In addition, the number of contributions that workers must pay before becoming eligible for unemployment benefit was increased from 52 to 104 weeks, while the maximum duration of benefits paid to new claimants was substantially reduced.

UK Compared to Ireland, the impact of the crisis on unemployment in the UK was relatively mild, with an increase from 5.3 percent in 2007 to 7.6 percent in 2009 (European Commission, 2010: 193). As in Ireland, however, the government response to the jobs crisis focused on measures for the unemployed rather than schemes to limit job losses. A certain amount of assistance was provided for employed workers; for example, the eligibility criteria for the ‘Train to Gain’ programme were relaxed and £350 million was provided to enable SMEs to train employees. However, the government did not provide support for short-time working, a measure demanded by the TUC but opposed by the Confederation of British Industry (CBI). While some companies agreed to reduce

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working time as a job-saving measure, these adjustments were made without financial compensation. Several motor manufacturers reduced hours through measures such as unpaid holidays, although in many cases this did not prevent subsequent redundancies (Glassner and Galgóczi, 2009). Overall, Elsby and Smith (2010) conclude that the rapid increase in the rate of job loss in the UK suggests that ‘labour hoarding’ was relatively modest and that the comparatively mild increase in unemployment might be explained by the relatively large fiscal stimulus provided by the government. Continued expansion in public sector employment during the early stages of the crisis may also have helped to cushion the impact (Eichhorst et al., 2010: 31). While the overall increase in unemployment was comparatively mild, those aged 15–24 years were much more affected, with unemployment rising from 14.2 to 19.1 percent between 2007 and 2009 (European Commission, 2010: 193). As a consequence, many of the measures introduced in respect of the unemployed focused on younger people. A ‘clearing house’ system was created to match displaced apprentices with employers who wished to hire trainees. The government also launched a Young Person’s Guarantee, which offered 18–24-year-olds a place in employment, education or training. The scheme was supported by a Future Jobs Fund, established to support 150,000 jobs, two-thirds of which were intended for young workers. The Future Jobs Fund and Young Person’s Guarantee were both terminated following the election of the Conservative-Liberal Democrat coalition in May 2010. The new government sought to depict the size of the public deficit as an outcome of profligate spending by its predecessor and imposed austerity measures, many of which have had implications for the four flexicurity components. With regard to lifelong learning, the government created new barriers to training and education by axing the Educational Maintenance Allowance that had previously helped young people from low-income families to access further education, substantially increasing the cost of a university degree, abandoning the Train to Gain programme of in-work training, increasing the cost of further education courses and shelving plans to allow workers employed by SMEs to request time off work to undertake training. With regard to ALMPs and social protection, the government, as noted, axed the previous government’s job subsidy measures (without first evaluating their impact). The main plank of the coalition’s employment policy is the Work Programme, which will involve harsher sanctions (by withholding benefits) for unemployed workers who decline job offers. In addition, the government has imposed severe medical tests for incapacity benefit claimants, with the aim of transferring many of them to unemployment benefits and linking their entitlements to their willingness to seek employment. These measures represent an intensification of the workfare-oriented New Deal employment policies championed by the preceding Labour government. However, while the basic principles underpinning the Work Programme resemble those that informed the New Deal, the new government has begun to reverse improvements in the ‘social safety net’ provided by the Labour government while extending the scope of household means-testing (as with entitlement to child benefits), which is a well-established characteristic of the UK employment and welfare model (Rubery et al., 2009: 67). The new government’s programme also has implications for the first flexicurity component, ‘flexible and reliable’ employment contracts. In place of the job subsidies that the preceding Labour government had hoped would encourage hiring activity, the

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coalition’s strategy has centred on the dilution of statutory rules relating to hiring and dismissal. As measured by the OECD employment protection legislation (EPL) index, employment protection in the UK is among the weakest in Europe (Venn, 2009). Nevertheless, the government has argued that UK employment rights discourage employers from hiring workers and has taken steps to weaken protections relating to unfair dismissals. It has also proposed new caps on compensation awarded by Employment Tribunals, a reduced consultation period for collective dismissals and additional restrictions on workers’ ability to take strike action. In portraying employment protections as barriers to job creation and competitiveness, the government has echoed the arguments of its predecessors since 1979, while seeking to eliminate the modest improvements in employment rights introduced by the Labour governments after 1997.

Germany Germany’s employment regime provides a high level of dismissal protection, relatively high income replacement rates for unemployed workers and sector-wide collective agreements, but has altered in important respects over the past two decades. German unification in 1990 acted as a trigger for change, giving rise to increases in social security spending and public debt that eventually led to increased political support for a weakening of employment and social protections (Lehndorff et al., 2009). Labour market and welfare reforms gathered pace in the new millennium under the 1998–2005 ‘Red-Green’ coalition. Following the report of the Hartz Commission, established in 2002 to develop recommendations for reform of labour market and social security policies, workers’ social security contributions were increased, income replacement rates reduced and the duration of benefits cut. The unemployed also came under increased pressure to accept work irrespective of its nature; and traditional policy measures, such as job creation and vocational education and training programmes, correspondingly declined in importance. In addition, the Hartz reforms stimulated a further expansion in low-paid, irregular and weakly protected forms of employment, thereby reinforcing the labour market dualism. The crisis hit the Germany economy relatively hard: in 2009 real GDP fell by almost 5 percent and exports by more than 14 percent (Dietz et al., 2011). However, the consequences of the economic crisis for jobs were mitigated by the extensive use of workingtime reductions as a means of reducing labour costs and avoiding job losses. The reductions were achieved through four means: first, temporary reductions in working time agreed by trade unions and employers; second, workers funding reduced working time from hours accumulated in their individual ‘working time accounts’ (which have become widely used in the past two decades); third, reductions in paid overtime; and finally, short-time working measures supported by the government and the Federal Employment Agency (Bundesagentur für Arbeit). Trade unions and employers also negotiated agreements designed to save jobs (Lehndorff, 2009). As the crisis began to bite, agreements relating to working-time reductions were concluded in various sectors, notably metalworking (European Foundation, 2010). A number of company agreements were also reached, although these varied in the extent to which employers were prepared to protect jobs and the extent to which workers incurred income losses (Glassner and Keune, 2009).

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While collective agreements played an important part in adjustments to working time, most work-sharing was supported by Germany’s long-established public short-time working programme (Lehndorff, 2009: 19). The maximum duration of support was extended from six to 24 months and the number of German workers working short-time increased from 20,000 per month in 2007 to a peak of 1.5 million in May 2009 (interview). Financial incentives, in the form of subsidized social security costs, encouraged employers to provide additional training opportunities for partially unemployed workers. According to BMAS officials, 148,000 workers with reduced hours had participated in training measures by the end of 2010. A large majority (approximately 120,000) took part in two- or three-week courses financed by the European Social Fund (ESF); a further 25,000 were involved in longer state-financed training. However, these figures need to be placed in perspective. Of all firms with workers on short-time measures, only one in seven provided training and fewer than 2 percent of all workers with reduced hours received training at any given time. Employers had difficulties finding courses that met the needs of both workers and of the enterprise, and the subsequent decision to extend 100 percent subsidization of social security costs to all short-time work lasting more than six months also reduced financial incentives for firms to offer training (Dietz et al., 2011: 24). Workers in non-standard employment bore the brunt of job losses during the crisis. By 2008 the number of agency workers had reached a peak of almost 800,000, but in 2009 this fell by 185,000 (Escudero et al., 2011: 22). Younger workers were also disproportionately affected and, as in the UK, were the principal focus of government measures: it introduced a training bonus to encourage employers to hire disadvantaged young people who had previously experienced difficulties in securing an apprenticeship. It also called on employers to provide 600,000 new apprenticeship places, but the latter objected. The Minister of Labour then refused to sign the 2009 joint declaration relating to the Ausbildungspakt (Training Pact), which has operated since 2004 (it was eventually signed in October 2010). These difficulties reflect the problem of the declining propensity of German employers to offer apprenticeship training places (Bosch, 2010). During phase one of the crisis, the government announced that income reductions due to reduced working time would not count in the calculation of initial unemployment benefits, should workers subsequently lose their jobs. The maximum duration of benefits was also temporarily increased and contribution rates were cut (Dietz et al., 2011: 20). However, phase two of the crisis has seen a weakening of social protection, following the election of the right-wing CDU/CSU-FDP coalition government in 2009. Despite economic recovery, the latter introduced austerity measures to reduce the country’s structural deficit by 0.5 percent per year between 2011 and 2014. The government has begun to reduce welfare entitlements and apply more restrictive labour market policies, albeit to a more limited extent than in the other countries considered here. Proposals for a national minimum wage have been shelved, a bonus scheme for employers who take on apprentices has been abandoned and parental leave benefits have been reduced. In an effort to increase ‘work incentives’ transitional supplements for workers transferring from the standard unemployment benefit to the lower benefit for long-term unemployed have been removed and the government has ceased paying the pension contributions of the long-term unemployed and other welfare recipients. The long-term unemployed have

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also lost their entitlement to parental benefits. Job advisors in local employment offices are to be given greater discretion in respect of the support they recommend to the unemployed, and support measures that are currently available by right are likely to become discretionary. These developments suggest an intensification of processes initiated by the Hartz reforms.

Czech Republic The Czech employment regime has been shaped by the process of transition following the break-up of the eastern bloc and accession to the EU. Like other candidate countries, the Czech Republic was required to ensure that its employment policies complied with the European Employment Strategy (as well as the broader social acquis), and this also encouraged partial policy transfer in relation to employment regulation. Shortly before accession, the government introduced new workfare-oriented programmes for the unemployed, closely modelled on the British New Deal. Expenditure on ALMPs – including measures to support lifelong learning – has remained low when compared to most other EU member states, as has the duration and level of unemployment benefit. By contrast, employment protection has remained relatively strong, with the Czech Republic ranked alongside Germany and Austria in the OECD index (Venn, 2009). As in many other previously communist countries (Iankova and Turner, 2004), tripartite social dialogue has played a major part in the Czech transition and subsequent development. There is a tripartite Council for Economic and Social Agreement (Rada hospodářské a sociální dohody, RHSD), originally formed in 1990 to ‘develop social dialogue with a view to maintaining social harmony as a critical condition for a successful transition to a market economy and higher living standards’ (cited in Casale et al., 2001: 12). It played an important role in the development of measures to address ‘phase one’ of the crisis, which resembled the German response in terms of the emphasis placed on subsidized short-time working. New programmes designed to support labour retention and retraining were introduced following discussions within the RHSD. The measures were strongly supported by the trade union confederation ČMKOS (Českomoravská konfederace odborových svazů) and the confederation of industry, SP (Svaz průmyslu a dopravy), which at an early point in the crisis reached a common position on the importance of preserving jobs. With financial support from the ESF, the government introduced three programmes: Training is a Chance, Educate Yourself and Restart. The first was targeted at SMEs and supported 200 training projects, each involving an average of 130 workers. Educate Yourself provided financial support to help 2000 firms retain and retrain workers (90,000 workers were assisted) while Restart supported re-skilling measures for workers who were due to be made redundant (interviews). A limited amount of company-level collective bargaining also occurred, as unions sought to preserve jobs by making concessions in respect of wages and other terms and conditions (examples included Czech Airlines and the DPP Prague public transport company) (European Foundation, 2010: 19). Social protection increased during phase one of the crisis. While a planned rise in the level of unemployment benefit was abandoned because of concerns about the consequence for the government’s budget deficit, the duration of benefits was extended for older workers (from six months to eight months for workers aged between 50 and 55 years

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and to 11 months for those aged over 55). However, in May 2010 a centre-right coalition government came to power and embarked on a programme designed to reduce the budget deficit to 3 percent of GDP by 2013, with substantial implications for employment and social protection. Contrary to normal procedures, neither SP nor ČMKOS were fully informed in advance of the content of the programme. The government proposed removing unemployment benefit entitlements from workers who leave their job voluntarily and sought to link benefit entitlements more closely to workers’ willingness to engage in active job search. The government also proposed terminating family ‘social allowances’, transferring many of the recipients to a ‘material need allowance’ and tying their entitlements to their willingness to participate in the labour market. Furthermore, the government echoed its UK counterpart in claiming that employment protection had acted as a brake on job creation, and announced its intention to reform the Labour Code to increase employers’ freedom to make repeated use of fixed-term contracts, extend the ‘probationary period’ during which workers can be dismissed without justification, and reduce redundancy payments for workers with less than three years of service. The proposals led to public protest and industrial action and the reforms that were eventually introduced in 2011 were less far-reaching than those that the government had initially sought.

Discussion and conclusion Responses to the jobs crisis in Germany, the Czech Republic, the UK and Ireland have shown both similarities and differences. With regard to government policies, common measures include subsidies to reduce employers’ pay and training costs and additional support for vocational training. The most substantial differences have been the greater emphasis placed on preventing job losses and training for ‘partially unemployed’ workers in Germany and the Czech Republic, compared to the UK and Ireland. The contrast may in part reflect differences in the strength of EPL: constraints on dismissals in both countries are relatively strong in respect of workers on ‘standard’ contracts, and this may have predisposed employers to seek labour cost reductions through working time adjustments rather than dismissals. Other elements of the two countries’ employment regimes have also facilitated responses based on ‘internal’ flexibility. In Germany, employers and trade unions were able to draw on existing resources (the short-time work scheme, collective agreements that provided for working time reductions and working-time accounts) to preserve jobs. Employers and unions were also able to negotiate additional job-saving agreements at sectoral and company level, reflecting the continued robustness of collective bargaining in Germany. In the Czech Republic, employers, unions and government were able, through the established mechanism of tripartite social dialogue, to develop a plan to save jobs and support retraining by using European funds. Again, the situation contrasts with that of the UK and Ireland. In the former, where social dialogue has long been virtually absent, the CBI and TUC were unable to agree on the desirability of a publicly supported short-time working scheme, with the result that measures to preserve jobs were left wholly to the discretion of firm-level actors. The inability of the TUC to secure government support for short-time working is a reflection of organized labour’s longstanding inability to exert a substantial influence over government policy (Nolan, 2011). More support for short-time working might have been anticipated in Ireland, given the existence of tripartite social dialogue and the fact that both IBEC and the ICTU

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were in favour of strengthening the scheme that existed before the crisis struck. However, Irish social dialogue has been geared primarily to the creation of periodic national partnership agreements, and the response to the crisis was driven by the government alone. Faced with rapidly escalating unemployment, it chose to prioritize assisting those who were thrown out of work. As in the UK, weak trade union organization in the private sector (D’Art and Turner, 2011), weak constraints on dismissals and limited support for short-time working discouraged widespread ‘labour hoarding’ by employers. Responses to the first phase of the crisis were therefore shaped in part by features of each country’s employment regime. However, political factors must also be taken into account. For example, the fact that the SPD headed the German government as the crisis commenced was important in ensuring political support for subsidies for short-time working. The decision of the European Commission to increase access to ESF finance was also important in facilitating the short-time measures introduced in the Czech Republic. In other words, while institutions may have given orientation to responses, they did not determine them. Moreover, the Czech and Irish examples show how corporatist institutions can become fragile in times of crisis. While tripartite institutions remain intact in the Czech Republic, the new right-wing coalition government has demonstrated its preparedness to bypass them (again, indicating the importance of politics). This is not the first time political support for social dialogue has waned (Casale et al., 2001: 13) and it is too early to say whether the government’s stance will harden into opposition to the principle of tripartism. In Ireland too, it is not clear that national tripartite social dialogue has been entirely abandoned. A recent agreement establishing a protocol for handling private sector pay negotiations suggests a residual commitment to at least some elements of tripartism (Sheehan, 2010). However, the prospects for social dialogue delivering gains for workers appear bleak, given the severity of the fiscal squeeze now being applied to the Irish economy. Austerity measures are being introduced in all of the countries examined in this article. The extent of social protection available to workers is being reduced while employment protections are under threat or viewed more suspiciously than before. The erosion of social protections implies a reduced emphasis on the security dimension of flexicurity. The reforms also imply that employment regimes are being partially re-shaped. This is not to suggest that regimes were previously unchanging. As Streeck (2010) has recently argued (following Polanyi, 2001 [1944]), there is an inescapable tension between market-constraining institutions such as social protection and the structural pressures that drive capitalists to seek to expand markets and overcome barriers to accumulation. Over the past thirty years, state support for constraints on markets has weakened, resulting in a tendency towards liberalization across the EU, yet this has often been overlooked in comparative institutional analyses of ‘varieties of capitalism’. However, the pace and extent of liberalization have varied across the EU, giving rise to a pattern of ‘variegated neoliberalism’ (Macartney, 2011). In relation to employment regimes, the liberalizing tendency has been reflected in declining trade union membership, the decentralization and erosion of collective bargaining, increasing inequality and ‘supply-side’ reforms directed at weakening employment protection and linking benefit entitlements to participation in the labour market. Many of these tendencies, already well established prior to the crisis, are being reinforced. There are also likely to be implications for lifelong

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learning. Training programmes tend to account for the largest share of overall state expenditure on ALMPs (Martin and Grubb, 2001: 25), but this emphasis was already declining in many countries before the crisis began. Faced with the twin challenges of reducing unemployment and the size of fiscal deficits, it is likely that governments will be tempted to cut relatively high-cost training measures, ratchet down expenditure on public employment services and further emphasize relatively cheap job-search activities and work-first measures. In part, reduced political support for protection in the four countries discussed in this article reflects the fact that all are (at the time of writing) governed by right-of-centre coalitions that are ideologically disposed to market-oriented reforms. However, experiences from elsewhere in Europe have demonstrated the difficulties that left-of-centre governments have experienced in resisting pressures from the IMF and the ECB to implement austerity measures and labour market reforms. Supply-side reforms of the labour market are also central to the European Commission’s proposals for generating economic growth in the aftermath of the crisis. The Franco-German initiated ‘Euro Plus Pact’, adopted in March 2011, calls upon Eurozone countries to pursue flexicurity, although governments are expressly directed to consider the ‘sustainability’ of the security aspects (unemployment benefits, pensions) (European Council, 2011). The Commission’s 2011 Joint Employment Report has similarly emphasized that unemployment benefit schemes should ‘provide the right incentives to work’ and called for greater sanctions for non-compliance. A renewed scepticism about the consequences of strong employment protection legislation can also be detected in the report, which recommends ‘removing institutional obstacles that prevent proper functioning of Members States’ labour markets’ (EPSCO, 2011: 9). In addition, the distinction between job security and employment security, which was submerged during the process of securing agreement to the common flexicurity principles (Mailand, 2010), has resurfaced: the Commission once more insists that ‘the flexicurity concept. . . is a policy approach geared less towards the protection of jobs, and more towards the protection of people’ (European Commission, 2012: 198). This position looks less compelling than it did before the crisis. The experiences of Germany, the Czech Republic and several other EU member states, including Austria and France, suggest that labour markets have been better able to weather the storm of the crisis where measures have been taken to protect jobs, whether that be through publicly supported measures such as short-time working or measures agreed through collective bargaining. Workers with temporary contracts, however, have typically lacked such protection and have thus been disproportionately affected by the crisis (ILO, 2009). While the Commission has insisted that national governments should involve the ‘social partners’ when developing measures to promote flexicurity within member states (European Commission, 2007: 18), the drive to austerity is creating new difficulties for social dialogue, even in countries where it was previously well-established. European trade unions have engaged with the flexicurity concept, but are now confronting a multifaceted onslaught on pay, jobs and social welfare entitlements. This onslaught has been met by protests and industrial action at the national level. At the European level, trade unions have voiced strong opposition to the ‘Euro Plus Pact’, the role of EU institutions in imposing austerity measures and the threat of EU interference in pay determination

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processes. In the ‘Athens Manifesto’, agreed at the 2011 ETUC Congress, the European trade union movement recently set out its commitment to fight against austerity, unemployment, inequality, precarious work and cuts in pay and social security (ETUC, 2011). The manifesto, which includes a demand that social rights ‘should take precedence over economic freedoms’ and calls for new constraints on market forces, suggests that trade unions may be distancing themselves from the ‘elitist embrace’ of Brussels (Hyman, 2005). If so, unions may also be led to reject flexicurity in its various guises in favour of measures that are unambiguously directed at reducing workers’ exposure to risk. Acknowledgements I am very grateful to the journal’s editor and referees for supplying extremely helpful comments on an earlier version of this article.

Funding I am also grateful to the International Labour Organization for providing financial support.

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Author biography Jason Heyes is Professor of Employment Relations at Sheffield University Management School, Sheffield, UK.