EurWORK European Observatory of Working Life

Deregulation

Deregulation is a strategy which aims to remove institutions of labour market regulation and reduce legal intervention in the relationships between employers and individual employees to a minimum. This includes removing not only regulations derived from state intervention, but also those resulting from the activities of collective organisations of labour, trade unions, notably collective bargaining.

Advocates of deregulation point to various features of labour market regulation in Europe, including strong unions, stringent employment protection and generous welfare provisions as an explanation for high unemployment levels compared with lower levels prevailing in the relatively deregulated labour markets of the United States. However, for instance, the 1995 World Employment report of the International Labour Organization (ILO) refers to deterioration in labour market performance in all OECD countries since the first oil shock of 1974 ‘irrespective of differences in labour market regulation’, and points to ‘rising inequality and falling wages in the less regulated United States labour market and high unemployment in the more regulated European setting.’

The EU has followed a policy of liberalisation and deregulation of markets in order to open them up to competition. Accordingly, this policy has been followed in the case of sectors such as transport, energy, postal services and telecommunications. The rationale for this is to enable consumers to benefit from lower prices and new services, which are usually more efficient and consumer-friendly, thus helping to make the EU economy more competitive. However, trade unions and employer representatives are wary of liberalisation and deregulation of sectors, fearing that this could have a negative impact on labour standards, pay, working conditions and employment in general. Overall, EU policy attempts to find a balance between opening up markets and ensuring a high level of good quality employment.

Most recently, attention has focused on the Transatlantic Trade and Investment Partnership (TTIP), which is a trade and investment deal that the EU is negotiating with the USA. The aims of TTIP are to open up the USA to EU firms, help to cut the red tape that companies face when exporting, and set new rules to make it easier and fairer to export, import and invest overseas. Advocates argue that this would generate jobs and growth across the EU, as well as cut prices and offer consumers more choice. However, trade unions are worried about the potential effects of this on the number and quality of jobs in Europe. The European Trade Union Confederation (ETUC) is demanding the inclusion of binding core labour standards and exclusions for public services in any agreement. BusinessEurope is in favour of concluding trade agreements on the basis that they can increase exports and make Europe more prosperous. It has stated that TTIP could lead to the creation of 1.3 million additional jobs in the EU over the coming 10 years.

See also: European social model; harmonisation; open method of coordination; social dumping; soft law; subsidiarity.

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