Report examines 'costs of non-social policy'

A paper published by the European Commission in March 2003, in the context of the mid-term review of the EU social policy agenda, looks at the cost and consequences of not having a social policy in place.

As a contribution to discussions held in March 2003 (EU0303205F) as part of the mid-term review of the five-year social policy agenda launched by the European Commission in June 2000 (EU0007266F), the Commission published a memorandum entitled Costs of non-social policy: Towards an economic framework of quality social policies - and the cost of not having them.

The memorandum begins by noting that social policy is generally held to perform the following two main functions:

• the redistribution of resources from richer to poorer households in order to reduce poverty and improve opportunities; and

• the support of aggregate household spending during economic downturns by maintaining the income of the poorest members of society.

Most concretely, the memorandum states that the European employment strategy (EES), which has an objective of reaching a general employment rate of 70% and a female employment rate of 60% by 2010, is playing a crucial role in reforming labour markets and releasing the potential of Europe. There are a number of complex links between economic performance and social policies, which the memorandum states that the EU is understanding to a greater and greater degree, through a range of initiatives, such as the current social policy agenda.

The document characterises social policies as covering a wide range of areas, including education and training, high performance standards at the workplace (including health and safety), active inclusion policies and 'social peace', stating that social policy is a productive factor and that 'an efficient, dynamic, modern economy needs to be built on solid social foundations and on social justice'.

The Commission goes on to comment that, although there has been much debate about the cost of these social policies, particularly in the framework of an EU/USA comparison, there has not been much discussion of the costs of not having a social policy. It states that developments such as improvements in the quality of work are essential as, without these, increases in employment levels could result in a lowering of average productivity per employee. Improvements in the quality of labour markets are, it states, a precondition for reductions in age, gender and skill-related gaps in the labour market, in addition to reductions in regional employment performance.

On an individual basis, those people employed in jobs of relatively low quality, which do not offer training and development possibilities or job security, remain at a much higher risk of unemployment and social exclusion, according to the memorandum. Thus, such people risk becoming trapped in a 'vicious circle of low quality-low productivity employment, unemployment and social exclusion'. The document ends by asserting therefore that 'most critics of the EU model fail to take account of the counter-factual alternative - what would happen without social policies. And here the evidence shows that the absence of adequate social policies can bring significant economic costs - hence the cost of non-social policies.'