EU Commission says falling labour remuneration leads to deflation and damages growth prospects

 

Visit by László Andor, Member of the European Commission in charge of Employment, Social Affairs and Inclusion to Bilbao, where he participated in the inauguration of and Signing of the OSHA Seat Agreement. (L-to-R) Pedro Llorente, Spanish Deputy Secretary for Employment and Social Security, Dr. Christa Sedlatschek, Director of EU-OSHA (The European Agency for Safety and Health at Work ), and Laszlo Andor. (EC Audiovisual Services 31/03/2014).

Visit by László Andor, Member of the European Commission in charge of Employment, Social Affairs and Inclusion to Bilbao, where he participated in the inauguration of and Signing of the OSHA Seat Agreement. (L-to-R) Pedro Llorente, Spanish Deputy Secretary for Employment and Social Security, Dr. Christa Sedlatschek, Director of EU-OSHA (The European Agency for Safety and Health at Work ), and Laszlo Andor. (EC Audiovisual Services 31/03/2014).

The social situation in the European Union keeps degrading and in many countries it has compromised the social cohesion. Yesterday the EU Commission published its quarterly review on “Employment and Social Situation”, with the unbelievable conclusion that, “The recent economic recovery has not yet been able to create new jobs and the social situation in the EU shows little signs of improvement so far”.

What kind of recovery is this?

The problem is that the economic recovery the Commission sees in Eurozone is rather a fictitious construction, unless a 0.1% increase of GDP can be called ‘economic recovery’. Eurozone was for four years in a downwards spiral of recession. At the end the sliding was arrested during the second quarter of 2013 with a 0.3% increase of the GDP. Then, in the third quarter of last year, growth retreated to a merely positive 0.1%, to crawl again back to 0.3% during the last three-month period of October-December. Not to forget that all those decimal points are well into the area of the statistical error and, as reality shows, this must be the case. The constant worsening of the social situation stands as an infallible witness to that.

Of course, the EU Commission could not avoid recognizing the real degradation of the EU’s social structures. Despite asserting that the Eurozone economy has managed to recover, European Commissioner of Employment, Social Affairs and Inclusion László Andor couldn’t avoid telling the truth. And the truth is that the employment and social situation in the EU has worsened and will keep on worsening in the foreseeable future. Not to forget that in less than 50 days the EU citizens will go to the polls and very probably will punish those who lie.

Down to reality

Having all that in mind, the Commissioner had to come to terms with the reality. So he said, “The EU economy has returned to growth at a slow pace but the situation of many households and individuals is not yet improving, with ever growing numbers suffering from financial distress. Inequalities have risen and there is a risk that the current fragile recovery is not going to improve the situation of many lower-income groups. The EU is still far from having secured an inclusive and job-rich recovery”. Everything that Andor said is quite true at the exception of the return to growth.

A good explanation why the Commission keeps insisting that Eurozone is in a growth path could be that it cannot support the opposite. For nine months now Eurostat has stopped publishing negative statistics about GDP. This is a good base for the Commission to argue that Eurozone has exited recession and is recovering. It also helps capital markets to gain some ground.

The truth remains though, that labour market conditions continue to deteriorate. The Commission’s Review notes that “January 2014 show that unemployment is still at record high levels…In several Member States, unemployment remains close to the historically-high levels first seen in the current crisis”. The Review also found “increasing use of temporary and part-time work. There is evidence that temporary employment has become less of a stepping-stone towards a permanent job since the onset of the crisis. At the same time, job stability has decreased significantly, especially for men and the young, and divergences between Member States became more pronounced”.

Increasing poverty

However, the Review fails to note that even in the theoretically exemplary country, Germany, the part of population at risk of poverty has increased greatly during the past few years from 12% to close to 18%. The German ‘discovery’ of petty-jobs has gained grounds in this country and the inability to support a family for people with a job grows fast. In other core countries like Holland and France unemployment is still rising despite a decimal growth of GDP.

As expected, the employment situation is reflected on incomes. The Commission’s Review states, “The income that households have at their disposal is lagging behind the growth in Gross Domestic Product (GDP). In 2013, the real Gross Disposable Household Income (GDHI) continued to decline year-on-year in the Euro area in real terms, though at a slower pace than before. Another worrying trend is the continuous increase of financial distress since 2010, with more and more of the population reporting the need to draw on their savings and, more recently, even to run into debt to pay for everyday living costs. Households with the lowest income are those hardest hit: 10% of adults in low income households are forced to run into debt and a further 15% must draw on savings to cover current expenditure (compared to 5% and 12% for the total population)”.

Impediment to growth

After all that, it is quite natural that poverty and social exclusion marked a further increase in 2013, for those countries where economic and labour market conditions have continued to deteriorate. However, the worsening conditions for large parts of the population doesn’t only hurt those affected. It undermines the overall effort of Eurozone to regain a sustainable growth path. On this issue the Review is pretty clear. It points out that “Related to high unemployment and job instability, the rate of growth of nominal unit labour costs has continued to slow down in the euro area in 2013, increasing the risk of cost-push deflationary pressures that could damage prospects of a sustained recovery and the accompanying creation of jobs”.

In plain English, this means that the German ideology, favouring austerity, is undermining the growth prospects of the entire economy just by condemning wage earners to continuous financial distress. Even in Britain, the conservative government of David Cameron recognized that and substantially raised the minimum hourly wage. In this way, Britain abandoned the labour cost competition with the developing world. It becomes clear that, when it comes to labour costs, trying to compete with China, as suggested by many, cannot help the western economies regain a sustainable growth path.

All in all, Europe has to change economic policy mix and return to home generated growth, through increased consumer confidence and spending, solidly based on sustainable wages and salaries increases. Understandably, exports will continue to also support Europe’s GDP but the internal economy would take over as main growth engine.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

We underestimate the power of data at our peril. This is why

EU to Turkey: No other ties than €3+3bn to upkeep refugees

Bank resolutions set to remain a national affair

Stop illegal trade in cats and dogs, say MEPs

Sustainable fishing staying afloat in developed world, sinking in poorer regions

5G networks: to slice or not to slice?

UN space-based tool opens new horizons to track land-use on Earth’s surface

UN agriculture agency digs in to help forests and farms build resilience to climate change

Stateless Rohingya refugee children living in ‘untenable situation’, UNICEF chief

Mental Health: In Times of COVID-19

Access to health and guarantee of sexual and reproductive rights as a way of eradicating HIV

How health privatization increases health inequities

4 bold new ways New York is going clean and green

Is there a de facto impossibility for the Brexit to kick-start?

Challenges facing the COVID-19 vaccination campaigns

Concorde is a reminder that the only way for innovation is up

Indoor air pollution is deadly. Here’s an unconventional solution

Rule of law in Slovenia: MEPs conclude their first mission to the country

Agriculture and Fisheries Council

Commission statement on the European Remembrance Day for Victims of Terrorism

Mergers: Commission opens in-depth investigation into proposed acquisition of GrandVision by EssilorLuxottica

2018 Sakharov laureate Oleg Sentsov receives his award

‘Amid stormy global seas, UN charter remains our moral anchor’, says Guterres on United Nations Day

3 ways to rebuild trust in how we regulate technology

Higher education becoming again a privilege of the wealthy?

Why do medical students need to go abroad to become a doctor in 2017?

Can India reduce deaths on one hazardous road to zero? This group is trying

It’s time for global businesses to accept local responsibility

Draghi rehabs ECB into a tool to support growth and employment; a departure from Teutonic orthodoxy

COVID-19: How the pandemic has made football’s structural problems worse

What’s a logarithmic graph and how does it help explain the spread of COVID-19?

European Commission issues first emission of EU SURE social bonds

Indonesia wants to reach net-zero plastic pollution by 2040. Do you have a big idea to help them do it?

Here’s how one social entrepreneur became a first responder to the Indian COVID crisis

The racial wealth gap in the US is affecting its citizens and its economy – this is how

The water where baby fish are outnumbered 7 to 1 by plastic

Medical students, climate change and health: an unorthodox combination

Celebrating Multilingualism Day at the EP – where 24 languages meet

Coronavirus: Commission approves contract with CureVac to ensure access to a potential vaccine

Female directors reached record highs in 2019 Hollywood

State aid: Commission approves €1.74 billion Danish scheme to support mink farmers and related businesses in context of coronavirus outbreak

Act now to end violence, Zeid urges Nicaraguan authorities

Fight against climate change and poverty will fail without overhaul of global financial system, says major UN report

As many as 330,000 displaced by heavy fighting in south-west Syria – UN agency

Virus Coronavirus: No time to die

What companies can do to build more inclusive AI

A Sting Exclusive: “Consumer expectations for the 2015 UN summit on climate change”, Director General of BEUC Monique Goyens outlines from Brussels

These EU countries have the most government debt

European Parliament approves more transparency and efficiency in its internal rules

What we take for granted: The EU is not perfect

This school-in-a-bag helps educate the most remote areas

Climate change is speeding up. Our response needs to be even faster

Situation in central Mali ‘deteriorating’ as violence, impunity rise, UN rights expert warns

MEPs debate Brexit and relations with China following EU spring summit

As COP25 goes into the night, Guterres calls for more climate ambition

EU’s judicial cooperation arm, Eurojust, to become more effective with new rules

Preparing Africa for ravages of climate change ‘cannot be an afterthought’ – COP24

Hungary: people born in the 2020s won’t have legal rights any more to buy tobacco

De-escalate now, to steer Yemen off ‘precarious path’, UN Security Council hears

Over 85% of European bathing sites rated as excellent for water quality

More Stings?

Comments

  1. Nice post. I learn something new and challenging on blogs I stumbleupon on a daily basis.
    It’s always helpful to read through articles from other writers and
    practice a little something from their sites.

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: