Sink or swim: recession and recovery in Europe
As the effects of the recession reverberate across Europe, national and regional governments in the Member States have responded by launching comprehensive anti-crisis packages. A key element of many of these packages is support and assistance for companies and workers facing labour market challenges.
National policies - Preserving jobs and planning recovery
The most common mechanisms used in Europe to tackle the recession and maintain employment are:
- short-time working schemes
- training programmes for employees
- reducing or deferring non-wage labour costs
Many EU governments have put in place compensation schemes whereby employers can apply for temporary state assistance to top up the wages of
employees working reduced hours. Such a mechanism both safeguards employees against severe income loss and enables employers to retain staff members, at reduced costs to the company.
Employment - The worst still to come?
Expectations as to how long the crisis will last – and how strong the recovery will be – play a role in a company’s decision to retain personnel or adjust staffing levels to the reduced output. The actual time required for a company’s reduction in output to translate into job losses, and the extent of these job losses, depends on a number of factors, which vary greatly between countries and sectors.
Across the EU, manufacturing – especially the production of machinery and equipment, motor vehicles and other transport equipment – has been the sector most affected by the current recession, along with construction.
Social partners - All in this together
Social partnership has been credited with contributing to much of Europe’s economic success; can it, however, continue to deliver in a time of economic downturn? It would appear that social partners are seeking to play an active role in responding positively to the crisis.
Recent data from Eurofound’s European Industrial Relations Observatory (EIRO) highlight the contribution that effective social dialogue can make in mitigating the effects of the current recession on companies, in keeping workers in employment and creating alternatives to redundancy.
Europe - A European response to recession
The basis for the European response to the recession is the European Economic Recovery Plan (EERP), which was adopted by the European Council in December 2008. The EERP seeks to coordinate Member States’ policies, as well as provide additional funding through the European Investment Bank (EIB) and funds such as the European Social Fund (ESF). The EU has also used the European Globalisation adjustment Fund (EGF) as an instrument to support restructuring measures. The main thrust behind the EERP is to stimulate spending and thus help preserve jobs until recovery reappears.
Change - Can we 'green' our way out of the crisis?
To protect jobs, companies are looking at ways to reduce employees’ working hours, such as:
- extended annual leave
- working time accounts and short-time working
- career breaks and sabbaticals
While the financial cost of redundancies certainly deters employers from letting staff go, there is widespread anecdotal evidence that companies have learned from previous downturns, when the dismissal of trained and experienced staff undermined company efforts to restore levels of production once economic recovery began.