No force will stop protectionism in Europe, most probably

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Workers prepare a layer of asphalt in front of the Austrian Chancellery building in Vienna, Austria, 20 October 2017. [Christian Bruna/EPA/EFE]

Although the compromise in the field of posted workers would not be beneficial to the single market, to drastically reduce the number of posted workers would be even more catastrophic for Europe as a whole, writes Marek Benio.

Marek Benio, PhD, is vice- president of Labour Mobility Initiative.

We are on the verge of accepting the revised rules on the posting of workers. Thousands of service providers and almost two million posted workers are attempting to understand their meaning and the idea behind them. We will discuss possible outcomes of the new provisions during the fifth European Labour Mobility Congress, the biggest European annual non-commercial event dedicated to the posting of workers and the freedom to provide services, 20-21 November in Kraków, Poland.

Cheaper workers?

The main driving force behind the posting of workers is no longer the wide pay gap – that would contribute to social dumping – but the skill shortage on local labour markets. The research data from Bruegel, CEPS, CUE, KU Leuven and French Government (sic!) shows that current provisions provide local labour markets with sufficient protection against a cheap work force. Employees working in the host state receive remuneration at least to the equivalent of the minimum pay rates applicable to local specialists. At the same time, their employers have to pay additional costs that do not encumber local employers. According to a survey covering over 20,000 postings conducted by the Kraków University of Economics, the cross-border costs amount to nearly 28% of the overall costs of labour.

What is the problem?

In fact, we are not talking about improving the working conditions of specialists as a group. The Labour Mobility Initiative (the biggest think tank in Europe engaged in this topic on which we conduct our own research and analyses as well as collecting information from entrepreneurs) indicates that the working conditions will improve in only one third of cases. The remainder will either lose their jobs, decide to work illegally or be pushed to involuntary self-employment. The only certainty would be the continued closure of local markets and the protection of companies against foreign competition.

Unfortunately, we have to accept that there is probably no force in the European Union that could stop this protectionist and populist attitude. We need to deal with the fact that since the rejection of the Nice voting system, countries such as Poland, Czech Republic and Spain cannot do much, even if they were united in opposition. Europe is no longer open to seeking unity as it was in the past. We are forced to look for a compromise even if such a compromise would mean the failure of a previously agreed unity and common EU goals.

Possible political compromise

There is a possibility to accept a solution that would allow all of the politicians to return to their countries and call the compromise their success:

On remuneration

Companies that post workers are aware that they have to pay more to employees. However, they will eventually pass this burden on to the recipients of services. This will jeopardise the EU’s external competiveness by raising the cost of labour and the prices of services in the single market. Nonetheless, if a political goal is to increase wages, it is relatively easy to achieve. In order to avoid legal ambiguity, the most reasonable compromise is to adopt the definition of remuneration proposed by the European Commission, which refers to law and only generally binding collective agreements. As proof that the purpose of the targeted revision is not to exclude foreign service providers from the market, no penalisation of the employers who omit naming particular elements of the remuneration should be introduced; as long as the net remuneration was equal or higher than the accurately calculated one. As a result, the political goals can be met but the employers would not be obliged to learn about the complicated systems recognised by collective agreements applicable in particular regions, industries, professions and companies (as not all of these have been published). This amendment appears in the “Estonian compromise” accepted by the EPSCO.

On time limit

The most difficult part will be to reach a compromise in terms of putting time constraints on the posting of workers. However, the future boundaries that will limit the freedom to provide services will be decided by others. The most important question, to which there are three different answers from the EU bodies is: what will happen after the time limit expires? Will the habitual place of work of the employee change by virtue of the law  – as the Commission proposes – or will the employee be subject to the entire labour law of the host state, excluding the provisions regarding the concluding and terminating of contracts – as proposed by both Parliament and the Council. Only in the lack of choice of law by the parties or in every case? If the maximum period for the posting of employees applies to either an individual posted worker or a single service, it would be safe to assume that it was aimed at protecting the rights of posted workers. Although such topics are less significant to politicians, they are of the utmost importance to posted workers.

The recent voting in the EMPL Committee and EPSCO show there is still little room for trialogue. The project presented by the rapporteurs for voting includes hardly any amendment proposals other than those compliant with the mindset of the richest states. This is similarly the case in the council. The initial version of the Estonian compromise was far more balanced than the final general approach.

Loss for the entire Union

Notwithstanding, it is worth remembering that – from an economic point of view – introducing the negotiated changes will generate losses for all sides. The skills available will drop in number and quality and the shadow economy will expand. In all probability, the system will become highly complicated and the implementation of rights will be much more difficult. The primary problems will be left unresolved, or may even deepen. Unregistered workers, self-employed and bogusly self-employed workers will continue to undercut the high social standards of the wealthier member states, fuelling unfair competition to both local service providers and genuine posting companies. Although we will probably not be able to avoid this outcome, we can still consider solutions that minimise these threats.