Blog / Knowlegde Bites

Europe cannot afford a half-baked social turn

In recent years, the European Union has made remarkable progress in advancing social goals, introducing new directives to protect workers and innovative funding instruments to boost social investments. The critical question now is whether this is just a temporary uprising or a sustained and durable transformation. In this context, the European Parliament elections will play a pivotal role in determining the future.  

In 2017, Europe’s leaders signed a declaration that set out 20 social principles ranging from adequate social protection and minimum income to investing in high-quality education and childcare to ensuring secure and adaptable working conditions. A host of legislative initiatives followed to make good on these promises. The EU faces an ageing population and tightening labour markets with increasingly large shortages of skilled workers needed for essential services for the climate transition. Rather than grappling with unemployment, the challenge now lies in finding the right talent to meet this growing need. As a consequence, Europe’s welfare states are being reformed to accommodate a skills-intensive dual-earner economy that capacitates households to combine work and care and that invests in future generations precisely to continue to be able to afford decent pensions for the old.

The long, painful, and slow recovery after the euro crisis has forced policymakers to break with unfortunate policy myths. As Mario Draghi recently admitted, Europe’s approach to competitiveness was a deliberate strategy of trying to lower wage costs relative to each other, which – combined with procyclical fiscal policies – weakened domestic demand and undermined its social model. It is now increasingly recognised that a well-organized welfare state is an asset and not a cost for a competitive and resilient economy and that adequate social protection is not only a moral imperative but also critical as a shock absorber in crises. After the COVID-19 pandemic, the EU took a different approach and enabled the welfare state to assume its stabilising role. The result was a much faster recovery, with unemployment decreasing despite the economic turmoil. With the EU’s recovery fund that was set up following the pandemic, Europe’s member states are now investing billions in education, childcare, training schemes for the unemployed, and other social services to boost long-term resilience.

While the recent progress on social goals is a fact to be celebrated, there is no space for complacency. This is where the importance of the European Parliament elections comes in to prevent a half-baked transition. A continuation of the initiated social transformation is anything but certain. Current EU funding and crisis instruments are one-off and unlikely to be made permanent; the new fiscal rules are more tailored but nonetheless stringent on welfare spending; and new – and legitimate – investment priorities are arising in the area of security and defence that may crowd out other investment domains. In 2027, during the term of the next European Parliament, many of these debates on future funding for social priorities will come to a conclusion. 

At the same time, new legislative initiatives are emerging on the horizon. There is potential for new directives on access to social protection and on adequate minimum income schemes, whilst new initiatives are on the horizon related to gender equality, anti-discrimination on the work floor, and representation of workers on company boards. The next European Parliament will have an important role to play in determining whether such initiatives will eventually come to fruition.

In this context, it is worth recalling that further pursuing Europe’s social agenda is not just a question of social need, but also one of potential. The European social model, long thought to be incompatible with financial sustainability and competitiveness, may actually hold the key to future success. The European Institute for Gender Equality, for example, projects gains from gender-equal policies for Europe’s economies to be in the range of 2 – 3 trillion euros over the long term. Investments in social protection or in childcare, education, and skills policies are all projected to lead to more economic prosperity. Comparative research underscores that the more inclusive welfare states in the EU not only foster greater competitiveness but also weather crises more effectively. The Report of the EU High-Level Working Group on the Future of the Welfare State shows that with an expansion of labour markets and prolonging of working lives, Europe is able to bear the rise in ageing costs. However, for this to happen in a stable and equitable way, continued welfare reform is of the essence. As such, Europe cannot afford a half-baked social turn.

David Bokhorst is a Research Fellow at the Department of Social and Political Sciences, where he focuses on comparative welfare state analysis, EU integration and the politics of structural reform.