This short speech unfortunately covers a very large theme: ‘What impact would health and social security reform and greater tax competition have on Europe’s labour market?’ Conversely: ‘What effect will a shrinking and more mobile labour force have on the prospects for social and economic change?’
I will focus on the problems I think we will have on the way to actually creating a more mobile labour force and to binding together the labour markets of the East and West. Among the problems that we have to tackle is that of the shrinking workforce.
I would like to start with a few personal observations about what I think we have to deal with in order to be able to arrive at a joint European labour market. First of all, we have to deal with a fundamentally sceptical population when it comes to labour mobility in Europe. I think we have to find some kind of magic antidote to the poisonous mixture of protectionism and xenophobia that Europe still suffers from.
My understanding of how sceptical Europe could be towards labour mobility started during the Swedish referendum on joining the European Union in 1994. A satirical radio programme made a prank call, which was received by a friend of mine, at the campaign office of Yes to Europe. My friend was told that if we joined the European Union there would be 40,000 gay men from Germany in leather and chains who would end up moving to Sweden. After a small debate, my friend, who is an honest person, said, ‘OK, the basic idea of the European Union is freedom of movement, so honestly I cannot say how many gay men in leather and chains will move from Germany to Sweden. It could be one, but it could also be a hundred thousand people.’ The caller then replied, ‘A hundred thousand gay men in leather and chains. Wait until I tell my friend. He thought there would be no more than forty thousand.’
The next time the same attitude emerged was prior to the enlargement of the European Union. Then we were told that our borders would be stormed by people who would come to Sweden just to benefit from our social systems, take our pensions, use our unemployment benefits, and so on. Our Prime Minister, Göran Persson, talked about social tourism. ‘They would all come from Poland,’ I think he said, ‘and we need large restrictions here on the freedom of movement.’
Now obviously we have another debate going on in Sweden at the moment. The worries are the same, but now the debate is in relation to the services directive. Now, though, there are no gay men from Germany, or lazy people from Poland. Now it is 40,000 Estonians who really want to come to Sweden to work.
The scapegoat keeps changing but the basic problem remains the same.
Obviously, I should be honest and say that I cannot imagine why so many people would want to come to Sweden. We have quite low real incomes, the highest taxes in the world and, to be honest, the weather is really pretty miserable.
Eventually, though, I think out of necessity we have to adopt another attitude in Sweden and in other parts of Europe, because I know that this is not an exclusively Swedish problem. The specific accession rules, when we had the enlargement of the European Union, were not actually implemented in Sweden. Sweden is one of very few countries that did not have specific limitations on movement of labour after the enlargement of the Union. I think we will be able to overcome the attitude problems, but there are still very many other challenges that we have to meet.
This leads me to my second observation - that we still have a very long way to go before we can say that we actually have some kind of common labour market. There are many reforms that need to be enacted but, after being a member of the European Parliament for around six months, I can say that the will to achieve these reforms is lacking. It is still much easier to send a hammer over the Baltic Sea than it is for a carpenter to go over the Baltic Sea and to drive in the nail.
I was actually reminded of this fact recently. A Latvian construction firm was asked to build a school in Vaxholm, a small town outside Stockholm. The problem was that the trade unions demanded that this Latvian firm have a collective wage agreement with the Swedish trade union, and this firm only had a collective wage agreement with the Latvian trade unions.
It all ended up in a blockade of the construction site, and many people from the trade unions standing around shouting, ‘Go home. Go home. Go home.’ The Latvian firm lost the dispute and went back to Latvia.
Who will suffer from this? The taxpayers in Vaxholm, who are the ones who will pay for the school, the children, of course, who will have to wait longer before they have a school ready for them to go to and not least the Latvian construction firm and its employees.
Many of the large reform projects were supposed to deal with these problems, but I believe progress is very slow, if indeed it is happening at all. The thing that people talk most about in the European Parliament at the moment is probably the Lisbon Agenda. I would say that the Lisbon Agenda to me sounds more and more like some kind of empty mantra used by politicians, who repeat it like Buddhist monks. It is repeated over and over again until they hopefully reach some kind of nirvana.
Yet the situation at present is far from heavenly. There is a focus on social cohesion and environmental improvements, and all those things that economic growth hopefully could lead to, but these things are at the moment more important and are often put before economic growth. What is not talked about enough, in this context, is what I would like to see as part of the Lisbon Agenda, a functioning services directive.
I believe that the most important European reform for better labour mobility would be a good services directive. The sad thing, though, is that in the European Parliament supporters of such a directive are becoming an endangered species. Most MEPs at the time of writing seem to be trying to get rid of different sectors of the services directive. It has become like a Swiss cheese – full of holes.
The first thing that many people want to take out of the service directive is obviously healthcare. I would say that health-care is the last thing we should take out. I cannot think of any other area that needs competition more than healthcare.
Through a good service directive in the healthcare area big government monopolies would face competition that really would benefit many European citizens. Demographics teach us the same thing. We need patients, nurses and healthcare institutions that move across borders. From this perspective it is rather strange that people in Sweden are worried about 40,000 Estonians willing to work, perhaps in the health sector. What they should really be worried about is what will happen to Sweden if nobody wants to work here.
The statistics are very clear on this. Today, on a normal day, only 3 out of 9 million Swedes go to work. When those born in the 1940s start to retire, we will have a real demographic problem in Sweden. When the Swedish retirement age was set at 65, life expectancy was 59. Now, when the average retirement age is 58, life expectancy is 80.
The problem is the same across much of Europe. To say that a European common labour market would be the sole solution would be disingenuous. Clearly, the problems are more complex.
There was actually one intelligent comment made in the European Parliament - and even more surprisingly, it was made by Kofi Annan. He said: ‘Immigration should not be described as one of Europe’s problems; it is a part of the solution.’ I think, when talking about this subject, we have to consider labour markets in a much broader perspective.
On a more basic level it is scary that the so-called European social model has created a society in which the fact that people live longer is looked upon as a problem. In Sweden, to tackle this problem the most commonly proposed solution seems to be higher taxes. The Social Democratic government has just declared that in next year’s election campaign one of their main policy issues will be a demand for higher taxes in Sweden. Can you imagine?
I think that we have to have real reforms in many different areas, not only the types of reforms that we are talking about in the European Parliament, because many of these reforms are just trying to fix existing problems. Göran Persson, Sweden’s Prime Minister, thought that the welfare system would be a motive for people to move to Sweden. I actually think the welfare system as such locks people to their own countries. I can change my car insurance when I move to another country, but when it comes to my state pension plan the situation is rather different.
I believe that great opportunities exist. The prospects for economic growth and social improvement are real for Europe. There are two important reasons, however, why we have a problem at the moment: the lack of labour mobility and population demographics. But to deal with these we have to tear down many of the cumbersome systems connected to health and social welfare. We need real reforms, often at national level, and we also have to admit that we need more immigration. If we were really to challenge the European social model, I would say that the future looks bright, so bright we might have to wear sunglasses.
© Copyright; Foundation for Economic Growth and various authors. Individual authors retain their own copyright.
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