Convergence: Policy pointers

13 December 2018

Socioeconomic area

A European minimum wage

Patterns of upward convergence in the socio-economic dimension are evident among Member States. However, the economic crisis has increased inequalities among the population. The gravity of the crisis has focused attention on social asymmetries together with macro-economic ones, given that social and economic goals influence each other, and the high long-term risks and costs resulting from lack of attention to social issues. The Social Pillar aims to ensure better working and living conditions across Europe and to fight social exclusion through better access to social rights, including education and training, social protection and health. In this regard, linked with the principles of the pillar, a European minimum wage coordination, as a way to support greater convergence in disposable income to reduce the number of working poor, has been widely discussed in recent years. Among arguments in favour of a EMW, the main ones relate to the upward convergence in national minimum wages that could reinforce the social dimension of the EU, prevent social dumping, and support aggregate demand. Among arguments against, besides the legal feasibility of EU intervention, are the potential effects on industrial relations and the role of social partners, the need to adapt and coordinate minimum wages to national needs and specificities, the effects on the competitive position of Member States.

Employment area

Regional dimension

For most labour market indicators, the shock from the crisis has been absorbed. The situation today is the same as before the crisis, or even better for some indicators, both in terms of the level of the indicator and the magnitude of disparities across Member States.

Notwithstanding the positive picture of restored upward convergence at Member State level, the analysis of convergence of regions and by different sociodemographic groups within the population shows less positive developments. For some indicators, differences are larger among regions than among countries, with a faster pace of convergence among the EU13. Furthermore, convergence trends in certain indicators at Member State level are not reflected at regional level. For example, convergence in the employment rate across Member States occurs simultaneously with divergence across regions. The analysis also shows Member States diverging in the employment rates of young workers and workers with higher educational attainment. These findings indicate that more attention should be given to the regional level in order to ensure that employment growth and reduction of disparities extends to all geographical levels and across the working age population.

A European employment insurance scheme

Given the breadth of the area of employment and the multiplicity of factors that influence labour market developments, the possible political interventions to support convergence of Member States in employment outcomes are vast. In this context, a European employment insurance scheme has been discussed as a mechanism to support citizens and to protect Member States from the economic shocks that undermine convergence. From a policy perspective, the rationale behind the establishment of a European unemployment insurance scheme is that it could potentially deliver significant benefits. However, there are also significant drawbacks to the implementation of such a scheme and arguments against it. Many factors temper support for such a scheme. However, the balance of benefits and downsides vary considerably depending on how the scheme is designed, and several proposals have been debated during the years. Acting now in a time of upward convergence is important in order to prevent future divergence and minimise the risk of future asymmetric shocks.

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