Flexibility in contract arrangements but employment activation ineffective

The concept of flexicurity originated from the aim to find a balance between labour market flexibility and social security. The European Commission identifies four key components: flexible and reliable contractual arrangements; lifelong learning; active labour market policies; and modern social security systems. In Luxembourg, flexible arrangements are well established, whereas employment activation has been a controversial topic, according to study results.

In a speech on 24 October 2007, the Luxembourg Minister of Labour and Employment, François Biltgen, gave the government definition of flexicurity in Luxembourg. According to this definition, flexicurity must be marked by the stamp of subsidiarity: the principles of flexicurity should be appropriate to the needs of national situations and specific companies. Flexibility cannot be imposed, but must be negotiated between employers and trade unions, with the principle of subsidiarity being taken into account.

Agreement on economy and flexicurity

One year earlier, on 28 April 2006, the government, employers and trade unions reached an agreement aimed at breathing new life into the economy. The agreement made recommendations for public finances, the labour market, housing and inflation. It also contained certain elements for the gradual and balanced introduction of flexicurity in Luxembourg.

Four components of flexicurity

According to the European authorities and employment policy analysts, flexicurity consists of four components. In its Communication Towards common principles of flexicurity (COM(2007) 359 (84Kb PDF)), the European Commission defines these four components: flexible and reliable contractual arrangements; comprehensive lifelong learning strategies; effective active labour market policies; and modern social security systems.

A 2009 study (in French, 372Kb PDF) by the Centre for Population, Poverty and Socioeconomic Policy Studies (Centre d’Études de Populations, de Pauvreté et de Politiques Socio-Économiques/International Networks for Studies in Technology, Environment, Alternatives, Development, CEPS/Instead) assesses these four elements of flexicurity in Luxembourg.

Flexible contractual arrangements

Firstly, flexicurity requires modern employment legislation, enabling sufficiently flexible contractual arrangements. Luxembourg is well advanced in this respect. The Act of 30 June 2004 on collective labour relations, incorporated into the Employment Code, provides an instrument for employers and trade unions to settle questions in this regard at national level – namely, the interprofessional social dialogue agreements. In this way, the government undertakes to consult employers and trade unions in order to decide the topics to be discussed with a view to reaching negotiated agreements. In the absence of an agreement within a reasonable period of time, the legislator will intervene in the areas discussed between the employers and trade unions, such as homeworking, telework and part-time work.

The Act of 19 May 2006, which aimed to complete the transposition of Directive 2003/88/EC concerning certain aspects of the organisation of working time, also offers some flexibility. Under certain conditions guaranteeing time off in lieu, the employers and trade unions may – for certain activities or in specific circumstances – depart from the general rules on break times, daily and weekly rest periods, the duration of night work and the reference period through collective agreements or social dialogue agreements.

This subject of flexible arrangements has been well established in Luxembourg since 2004. It has led to the establishment of an agreement for teleworkers. Another agreement, on individual access to continuous vocational training, was made a general obligation by a Grand-Ducal regulation in 2006.

Lifelong learning

Secondly, flexicurity requires a lifelong learning system that is sufficiently effective to ensure the adaptability and employability of workers. In May 2006, the government cabinet adopted a bill on continuous vocational training. Career guidance and initiation courses will form an integral part of the education and training system and will no longer represent a purely anti-unemployment measure. A second bill, adopted in September 2006, relates to the reform of vocational training. These bills are now beginning to be implemented in practice.

Active labour market policies

Thirdly, flexicurity requires effective activation policies in the labour market. The tripartite agreement of 28 April 2006 resulted in a new bill – No. 5611 – stipulating employment activation as early as possible and an increase in the employability of people registered with the employment service. However, two factors have made it difficult to reduce the unemployment rate of the resident population:

  • the unemployment rate in the neighbouring countries of Luxembourg is higher than that of the resident population;
  • certain precise qualifications demanded by companies established in Luxembourg are lacking within the country.

The necessity to recruit qualified labour from outside Luxembourg is consequently inevitable.

Much was written about Bill No. 5611. The fundamental problem was that the document could give the impression that unemployment among young people was due to their own passivity. The desires for reforms with regard to youth unemployment sparked a wave of protests. The government had to yield on some points and Bill No. 5611 was amended. In this way, the waiting time of six months before being entitled to unemployment compensation was lifted by the introduction of a procedure to create employment.

Modern social security systems

Finally, flexicurity needs modern social security systems, providing adequate replacement income to facilitate transitions in the labour market. The government addressed this subject through a broader concept of ‘continuation in employment’ that can be considered as an advanced form of the gradual introduction of flexicurity.

Commentary

Flexicurity in Luxembourg has not been subject to a debate on the total introduction of all of its component parts. Its gradual application is fragmentary and the country does not seem to be ready to yield on certain elements, as demonstrated by the controversy surrounding Bill No. 5611.

Reference

Clement, F., CEPS/Instead, ‘La « flexicurité » : définitions et applications au Luxembourg’, Governance and Employment, No. 7, March 2009.

Véronique De Broeck, Prevent

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