Industrial relations and social dialogue

Policy responses from governments and social partners to the COVID-19 pandemic

EU Member States acted swiftly in the early phase of the COVID-19 pandemic, introducing measures aimed at cushioning the impact of the crisis on society, the economy and the labour market. In some countries, policies targeted businesses and employers directly; elsewhere, employees and self-employed people in sectors negatively affected by lockdowns were given dedicated support first. The two different approaches that were initially taken – supporting businesses in retaining employment and supporting individual workers who had lost their jobs or were in danger of losing their income – created an interesting contrast in COVID-19 support policy and often determined a country's later response as well.

This article is one of a series that explores working life issues in the 27 EU Member States, Norway and the UK during the COVID-19 pandemic. It is based on information provided by the Network of Eurofound Correspondents and published as a set of individual country reports in ‘Working life in the COVID-19 pandemic 2020’.

Preserving jobs and retraining unemployed people

Governments in EU Member States, Norway and the UK took action to address the social problems caused by labour market turbulence. In many countries, this was done by putting measures in place to strengthen the financial capacity of businesses to retain labour through a subsidised short-time working (STW) scheme or through other types of financial support to contribute to the wage costs of workers. Other measures included providing extra benefits to people who lost their jobs – for example, by extending the duration of unemployment benefits. Most countries used a combination of these labour market tools, making it difficult for employers to let go of workers and/or providing more support to workers who were made redundant.

Norway, for instance, introduced a temporary measure to reduce the cost of layoffs for businesses while, at the same time, increasing the unemployment benefit. In the accommodation and food and beverage services sectors – some of Norway’s worst-affected sectors – 57% of workers were unemployed in April 2020. Similar measures were introduced in Belgium.

In Sweden, as part of the bipartite restructuring of organisations, nine out of ten workers who had lost their jobs were able to find new employment within seven to eight months. Restructuring at company level, accompanied by measures in support of professional reorganisation and transition, has long been an instrument used to address labour market changes, but the process gained even more traction in 2020.

Countries implemented different measures in their bid to protect workers and prevent redundancies. For example, in Lithuania, where €500 million was allocated to preserve jobs, the key message was ‘to keep as many people in the labour market as possible’. In Hungary, by contrast, the government’s ambitious slogan was ‘we will create as many new jobs as the virus destroys’. In Italy, a ban on dismissals was agreed, making the retention of jobs a top priority. The goal of retaining employment was also high on the agenda in Slovakia.

Extending the duration of unemployment benefits was widely used as a form of social support (such as in Greece and Spain). Other measures used included expanding unemployment benefit eligibility (such as in Slovenia).

The education and retraining of unemployed people became a priority in 2020 and in many countries recipients of wage subsidies were required to reskill. In the Netherlands, for example, the government and social partners emphasised the need to reorient education towards the development of relevant skills: the impact of COVID-19 on sectors that were already ailing before the pandemic necessitated rapid changes and the reskilling of workers. In Norway, the government introduced a temporary scheme to allow people to receive unemployment benefit while studying or training. Enhancing employability and training was part of a COVID-19 measure introduced in Portugal. A fully funded college course that was free for people with lower education levels was on offer in the UK, while funding for apprentices to continue their work and study schemes was extended.

Remote working becomes the ‘new normal’

Organisations in every Member State introduced some type of flexible working arrangement, such as remote working or teleworking, during the pandemic. In Italy, a total of 6.6 million people were working remotely during the COVID-19 pandemic – a 12-fold increase compared with 2019. Many of these changes included adopting flexible working arrangements or ‘smart work’ (lavoro agile) as it is referred to in Italy. The transition to smart work was particularly evident in public administration, where teleworking was not widespread before.

Given the necessity to move rapidly to new working arrangements including telework, the pandemic highlighted companies’ lack of preparedness regarding ICT in many countries. In Italy, larger businesses were forced to invest 65–69% more on hardware and remote tools. Conversely, workers in the public sector were encouraged to use their own equipment.

One issue that arose in relation to teleworking during the pandemic was the question of who is responsible for the associated costs and for the health and safety risks of employees working from home.

An important aspect in the transition to teleworking was whether it was based on a unilateral decision or whether it was by mutual agreement between employer and employee. In Hungary, for example, employees could be required to work from home based on a company’s decision that was backed up by a legislative order. On the other hand, in Luxembourg, for example, companies arranged teleworking by agreement with their employees. A special circumstance for Luxembourg was the case of some 200,000 cross-border workers whose situation regarding remote working had to be taken into account. In Spain and Portugal, while teleworking was promoted and encouraged, it was not a mandatory requirement.

It is likely that in many countries, due to a lack of clear-cut legislation, many informal agreements and practices were put into operation to address the crisis situation – and it is possible that some of them may give rise to labour disputes in time.

Short-time working schemes put to the test

Member States used STW schemes and similar approaches to alleviate the impact of the pandemic on the labour market. While STW or downtime schemes were used in all Member States, there was a wide variation as to how countries rolled out the schemes in 2020.

In some countries, the STW application process was complicated, with support often only provided after a long delay (such as Czechia, Estonia, Hungary, Slovakia and Sweden). In some cases, where the support offered was considered to be paltry, workers decided not to avail of the scheme. At the other end of the spectrum, some countries offered STW schemes that were nearly automatic, with easy access and availability. In one reported instance, in Lithuania, the state tax office contacted 34,000 microbusinesses deemed to be most deserving of such a subsidy and invited them to apply.

In some countries, the authorities carried out thorough monitoring and feedback of the schemes: in Italy, for example, uptake of the STW scheme was scrupulously measured and the number of hours worked was subject to approval.

Countries that already had an STW scheme in place and only needed to refine their scheme to address the pandemic (such as Austria, France and Germany) seem to have achieved greater overall success and a high take-up of their scheme. In other countries (such as Hungary, Lithuania, Luxembourg, Poland and Spain), an STW scheme was introduced as a new element of labour market stabilisation.

The necessity to adopt a flexible approach to the application of the STW measures in response to the impact of the COVID-19 pandemic was one of the most challenging aspects of policy design. In France, for example, the longer-term impacts of the pandemic on certain sectors that were difficult to restart were treated separately from ones where a quick recovery was assumed – in the latter, state subsidies were quickly cut or withdrawn once the recovery kicked in.

Identifying priority sectors, organisations and occupations

All countries identified the most obvious sectors where the COVID-19 pandemic had an immediate impact. The Horeca (hotels, restaurants and cafés) sector was at the top of the list for most countries, while the attention given to the creative industries and culture varied from country to country. The retail sector was more difficult to assess in terms of support required, as some forms of retail did extremely well in the face of lockdowns and other social distancing measures, while other parts of the sector experienced significant lossesAgriculture tended to fare badly and was subsidised, for example, in Norway and Romania (poultry, cows and pigs), with EU funding used in the latter country. In Romania, employers, as well as day labourers and seasonal workers, received financial aid. During the summer of 2020, Norway launched a grant scheme for cultural events and offered support for large open-air events.

In many countries, a list was compiled that included business activities and/or occupations (by statistical code) that were impacted by the pandemic. These lists were used to identify the target groups that would need subsidies during the COVID-19 pandemic. The value of this approach was limited, since in many cases it was not possible to compare the actual turnover of companies and sectors with pre-COVID-19 times. In some sectors, the drop in turnover could be seen very quickly within the early months of the pandemic, but in others, such as seasonal sectors or sectors that were less easy to plan, the drop in turnover was not as apparent. In some countries, public support for jobs was determined on the basis of a certain threshold of turnover losses. With the virus showing signs that it is here to stay, it will be possible in the future to make more precise calculations about the economic impact of the pandemic. Until then, however, policymakers in some countries are likely to argue that all businesses should get support.

The occupational groups targeted to receive subsidies were across all countries similarly defined as workers in the sectors and occupations most vulnerable to COVID-19 lockdowns and closures. Interestingly, in Greece, occupational groups in ancillary services for these sectors – such as economists, accountants, engineers, solicitors, doctors, teachers and researchers – were also taken into account. Apprentices received financial support in Austria, Norway and the UK.

Care services

Looking at the area of care in the personal and household services sector, both the service providers and the vulnerable groups they assist were taken into account. The COVID-19 pandemic has impacted greatly on people with disabilities and the caregivers who work with them. In some cases, caregivers have lost their jobs or have been required to work shorter hours (such as in Denmark and Germany). In Denmark, the organisations that hire caregivers (NGOs, social services) were given the funding as opposed to individual caregivers as a way of subsidising people through work.

It is likely that the grey and black market has played a greater role in the care sector in 2020 – with caregivers leaving formal employment due to COVID-19 and replaced by precarious workers – but such developments are not currently documented. In contrast, Ireland took care to prioritise the care industry, ensuring, for example, that workers in the childcare sector received a top-up so their earnings did not fall below pre-COVID levels.

To address the more widespread problem of caring for children who were kept home from school and childcare during closures, support usually took the form of financial compensation (such as in Bulgaria, Czechia, Denmark, Germany, Latvia, Lithuania, Malta and Slovenia) or extra leave for parents (such as in Austria, Germany, Greece, Poland, Romania and Norway). In Lithuania, families with children received assistance in the form of a lump sum while in Malta parents were granted an €800 bonus. In Slovenia, crisis bonuses were given to people with disabilities, people living on pensions, people who are in low-paying jobs and large families. The crisis bonuses also rewarded people working in essential services and people working in jobs that were considered to be high risk due to the pandemic.

Mixed cooperation between governments and social partners

The involvement of social partners in addressing the issues associated with the COVID-19 pandemic ranged from initiating some of the COVID-19 aid measures introduced by countries and providing financial support (such as in Belgium and Denmark) to very little involvement (such as in Hungary and Poland). Additionally, in some countries, such as Bulgaria and Czechia, the pandemic triggered a public discourse on unemployment and labour market flexibility that included social partners.

In many countries, consultation with social partners was often omitted on the grounds that time was limited due to the urgent response required. In some countries (such as Portugal), the social partners accepted this government rationale. In other countries (such as Hungary and Italy), social partners felt that lack of time was used as an excuse for sidestepping the already eroded channels of negotiation and participation. Where social partners were excluded from the planning and design of measures, the responsibility for the COVID-19 response fell wholly to the government. One example was Latvia, where employer organisations demanded that the government compensate organisations which had lost income as a result of their activities being restricted by the government's measures – a sign that ownership of those measures was not shared by them.

In countries like Austria, Belgium, the Netherlands and Sweden, where social dialogue has traditionally been strong, the social partners were involved in the later stages of intervention design by giving feedback and ensuring that different voices in society were heard. In the Netherlands, for example, before the government issued its third set of pandemic-related measures, the social partners took a stand to highlight a debate on whether the state should keep non-viable businesses afloat with its pandemic subsidy system. The debate centred on the need to keep people in employment, but at the same time to allow market forces to run a more efficient economy. Both sides of this debate were also argued by social partners in Czechia.

There was variation among countries in the extent to which collective agreements were used to bring about important agreements or labour-related interventions. In Belgium, Germany and Sweden, for example, COVID-19 policies were implemented partly through collective agreements. In Czechia, Hungary, Poland and Romania, where collective agreements were not numerous and weak, the pandemic further highlighted the limitations of these instruments.

Opportunities to promote the green agenda and sustainability

In some countries, employers urged governments to invest in longer-term projects that would support innovation, digitisation and the green economy. At the same time, trade unions pushed for social reforms to address needs that were exacerbated by the pandemic (such as in Denmark and Estonia). Denmark introduced an investment stimulus package to fund climate-friendly projects, aimed at boosting spending and, in turn, helping businesses.

In other countries (such as Spain), longer-term economic planning, including the setting of sustainable goals for the future, was redesigned in light of COVID-19. In Luxembourg, due to the need arising from the pandemic to explore adaptability and future-related issues, the government looked into participative recovery strategies with the municipalities. The measures explored included fighting inequality, ensuring good governance practices, moving towards a low-carbon economy, improving citizen well-being and promoting inclusive growth.

The need to examine longer-term effects and sustainable support was also part of discussions in the Netherlands. Sweden opted to fund vocational education and create jobs for long-term unemployed people in the area of forest and nature conservation, aimed at ensuring the sustainable development of a post-COVID-19 labour market.

Conclusion

Although labour market or indirect labour policy measures tend to be favourably viewed when subject to scrutiny and cost–benefit analysis, the problem with the COVID-19 measures was that their impact was sought in the short or very short term and that it was not possible to plan for the future. In such an unpredictable environment, it is probably true to say that many of the measures, by their nature, were designed as long shots.

The participation of social partners across EU Member States, Norway and the UK in the design of measures and the testing of their effectiveness was uneven, ranging from social partners driving and even financing measures to social partners being sidestepped by governments compelled to work under time pressure and react to the emergency situation alone.

While it is too early to evaluate the effectiveness of the various pandemic responses by governments, it is fair to say that the measures adopted in 2020 were broad and far-reaching in their aim to reduce potential damage to society and to the economy.

Image © Robert Kneschke/Adobe Stock

Forschungsarbeiten, die vor dem Austritt des Vereinigten Königreichs aus der Europäischen Union am 31. Januar 2020 durchgeführt und anschließend veröffentlicht wurden, können Angaben zu den 28 EU-Mitgliedstaaten enthalten. Nach diesem Datum werden nur noch die 27 EU-Mitgliedstaaten (EU-28 ohne das Vereinigte Königreich) in den Forschungsarbeiten berücksichtigt, sofern nichts anderes angegeben ist.

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