Employers call for government reforms

The board of directors of the Union of Luxembourg Enterprises (UEL), one of the country’s leading employers’ organisations, has called on the government to bring in reforms to restore the country’s competitiveness. The UEL directors’ demands, set out in a declaration made on 28 September 2012, include proposals for reform of the labour market. Thousands of jobs have been lost in the past four years, and there are particular concerns about youth unemployment and pensions.

Background

Luxembourg has been hit hard by the weakened economic climate. The loss of 21,400 industrial jobs since 2008 was announced by Robert Dennewald, President of the Luxembourg Business Federation (Fedil) in an article in L’Essentiel (in French) on 9 October 2012.

In the light of this, the Union of Luxembourg Enterprises (UEL), a leading employers’ organisation, has called for action, saying that ‘an urgent effort on the part of the country and those in government’ is essential. In a press release (in French, 540Kb PDF) UEL’s board of directors called for an ‘action and reform plan’ to be implemented in the four key areas: the labour market, education and training policy, public finances and pension insurance.

It believes that, from the employers’ viewpoint, the ‘economic and social model needs to be rethought’.

Reform of the labour market

UEL claims that the employment market is continuing to deteriorate, and that restructuring in industries and sectors where production processes are labour-intensive will make matters worse.

This was highlighted when several announcements of job losses were made recently within days of each other.

The ArcelorMittal group said a production line employing 47 workers at the steelmaking plant in Schifflange was to close.

This was quickly followed by the news that the Roost wire factory, belonging to the Korean Hyosung group – which employed 204 workers – was to be shut down.

A threat also hangs over the 250 workers at the Luxguard Dudelange site, which manufactures glass. On 9 October 2012, the workforce rejected the 15% pay cut put forward by management to save the plant from closure.

UEL is alarmed by the increase in youth unemployment and the mismatch between demand and supply in the labour market. In their statement, the UEL directors said:

Higher wages following the indexation of salaries on 1 October 2012, and the increase in the social minimum wage (in French) announced for 1 January 2013, will weaken low-skilled employment further.

They conclude that Luxembourg needs to halt the rising cost of its labour force by freezing labour costs. The government, they say, should encourage ‘greater flexibility of working hours’, particularly in the construction sector and for seasonal activities. They argue that what is required is ‘to promote employment, rather than fund unemployment’.

Strengthening education and training

To boost workers’ employability, UEL urges the various labour market players to negotiate the ‘implementation of a training system that better prepares young people for the world of work’.

It sees an urgent need to create ‘an education system that will allow young people to be well prepared to apply for the jobs being offered by companies’. The employers also want to adapt:

...the conditions in the public sector to avoid most young Luxembourgers being employed by the state, local authorities or public institutions, whereas the private sector on average employs more than 80% non-nationals.

Call for budgetary rigour

UEL adopted its declaration on the eve of publication of the draft state budget for the 2013 financial year, which was presented on 5 October 2012 by Prime Minister Jean-Claude Juncker. UEL described the state of public finances as ‘extremely precarious’, and accused the government of abandoning its objective of balancing public finances by 2014. The employers demand that the government:

...communicates its strategy for rehabilitating public finances and introduces without delay the unavoidable cuts in state expenditure for administration costs, transfers and consumption.

Reform of pension insurance

Faced with worsening public finances, UEL has also attacked the government’s lack of ambition concerning the reform of the general pension insurance system. UEL believes the government cannot ask parliament to pass a reform which, ‘to be sustainable’, requires annual growth of 3%, given that the cumulative growth of the economy from 2008 to 2012 was zero.

The employers’ organisation calls on the government ‘to take more incisive measures to reform the pension system’. Failure to do so, it says, could disadvantage young people and ‘jeopardise the intergenerational pact’.

On 16 October 2012, six unions organised a protest against what they regard as unfair pension reforms.

Frédéric Turlan, IR Share