European Employment Models under Pressure to Change

Article excerpt


"National employment models" comprise the whole range of institutions that determine labour supply, utilization and demand in different countries. Based on a study of existing typologies of these models, this article explores their workings and their capacity to survive pressures for change. It compares different models' attempts to safeguard decent working conditions in the face of product-market deregulation and rising employment rates of women and older workers. It concludes that it is becoming increasingly difficult for European nation states to reform their employment models from within and argues for more emphasis on positive integration policies at the European level.

A completely free market able to function without institutions is a theoretical fiction. As Stiglitz recently commented, "one of the reasons that the invisible hand may be invisible is that it is simply not there" (2003, p. 13). The exchange of goods in societies structured around a division of labour requires rules and institutions that safeguard property rights, provide information and reflect the balance of interests between the various actors at a given time (Gadrey, 2005). The consequence is that even individualized decisions made by actors pursuing their own interests are embedded in and shaped by the institutional and social environment. This is why Etzioni describes competition as "contained conflict" (1988, ch. 12).

Institutions have been defined as building blocks for social order, both to govern and to legitimize behaviour (Streeck and Thelen, 2005, p. 10). As such, they not only embody social values but are also reflective of historical compromises between different actors. It is therefore scarcely surprising that today's institutional arrangements differ quite considerably across capitalist societies. The expectation of difference applies especially to employment systems, in which it is human labour that is exchanged. An employment contract is necessarily incomplete, since the actual performance required and rewards offered are constantly subject to new decisions after the contract has been concluded. To limit uncertainty, institutions - both formal and informal - influence not only the contractual conditions, but also the right of employees (or their representatives) to co-determination with regard to working conditions and the organization of the work process. These inherently political and historical compromises inevitably give rise to varieties of employment arrangements and conditions. However, the sources of differences in the employment relationship extend beyond the industrial relations and production systems to include the societal institutions that produce and reproduce labour itself - the family and the educational, training and social security systems. This multiplicity of institutions influencing labour supply, utilization and demand in a given country constitutes what we call a national employment model.

A key issue is whether these institutional arrangements should be regarded as potential contributors to productive societies or as obstacles to market efficiency. For neoclassical economists, institutions other than those required to maintain the rule of law and safeguard property rights are obstacles to efficiency that should be eliminated. Social institutions or redistributive policies may still be implemented, but only to redress unacceptable market outcomes, not to shape the market itself. Institutional analysts, however, have disputed this approach from a range of perspectives. First of all, the "varieties-of-capitalism" school has argued that strong institutional arrangements and configurations can contribute to productive efficiency, particularly in the long term, where the conditions conducive to innovation and embedded comparative advantage may outweigh the benefits of pursuing short-term profit and growth opportunities (Hall and Soskice, 2001). second, not only is there limited evidence of any strong or consistent trade-off between welfare state development and growth, but also the varieties of development of welfare and family systems are linked to different patterns of employment growth, especially in the social services of advanced countries (Esping-Andersen, 1999). …