Investigate Europe – Europe’s new reserve army

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Millions of Europeans in temporary, part-time or bogus self-employed contracts can only find insecure and badly paid jobs, despite the healthy economic climate. That is the price of deregulating labour markets, Investigate Europe reports. This precarious set of labour conditions was created intentionally.

By Harald Schumann and Elisa Simantke

Investigate Europe is made up of nine experienced journalists from eight European countries. They research as a multinational team, sharing, merging and crosschecking facts – tackling the usual national bias. They point out responsible transnational structures and actors in issues of European-wide relevance to make it possible to hold them accountable.

A version of this article was originally published in German by the Berlin daily Tagesspiegel.


The misery of bad jobs has many faces. It can take the form of work contracts without health or social insurance; it can be part-time jobs, which don’t pay enough to live on. Or those affected are kept dangling from one temporary contract to the next, or they have to eke out a living as bogus self-employed and contract workers (see examples). The methods vary from one country’s national legislation to that of another, but the outcome is always the same: millions of EU citizens have to get by with insecure and badly paid jobs, offering them no perspective – and this is a growing tendency. France’s President Emmanuel Macron wants to enhance the trend still further. In future, his government will permit employers to hire workers for individual projects only – on contracts which can be cancelled at any time. This often coincides with the dismantling of nationally valid collective agreements, which up to now have offered protection against such practices.

And this is at a time when Europe’s economy is in the best shape it has been for 10 years. In the euro zone alone five and a half million people have found new work since the end of 2012. But according to data provided by Eurostat, the statistical office of the European Union, four out of five of these new jobs are only part-time or temporary and mostly they are badly paid. At the same time, two-thirds of those affected would like to have permanent, full-time jobs, the EU Commission confirms in its latest report on the EU labour market. Europe’s supposed boom is “of low quality”, concluded the research department of US bank Merrill Lynch.

It affects young people above all (see graph). Nearly half of employees up to the age of 25 are employed on temporary contracts, in Spain this figure is even more than 70 percent. “That is very problematic,” says Marianne Thyssen, EU Commissioner for Employment and Social Affairs. “It prevents them leaving their parents’ house, they cannot buy a home or make any decisions, and that weakens the entire economy,” warns the conservative EU politician from Belgium. “People in insecure jobs do not invest in their skills nor do their employers,” she explains. “The more precarious jobs there are, the less productive the economy is,” says Ms. Thyssen, and she is in agreement here with eminent economists. “All these insecure forms of work are extremely expensive – both for those affected and for society as a whole,” says, for example, Olivier Blanchard, the long-standing chief economist of the International Monetary Fund.

But why has job insecurity reached such levels? And what has to happen to halt the trend? The team from Investigate Europe has looked into these issues, and the findings are sobering indeed. In their regulation of labour markets:

– European governments and the EU Commission have been following assumptions and theories for years, which have been shown to be wrong and unrealistic;

– Commissioners and finance ministers of the euro group have systematically dismantled or weakened collective bargaining agreements, fought against trade unions and, by doing so, promoted inequality and job insecurity;

– EU countries are now caught up in a race to the bottom with regard to wages and employees’ rights, making national solutions more difficult.

The keyword for this development is “flexibility”, explains the French trade unionist Thibault Weber, an academic business economist who is the expert in such matters on the board of the European Trade Union Confederation. Europe’s economic policymakers are “obsessed with the idea that the labour market is a market like any other and therefore has to be made as flexible as possible”, says Mr. Weber. But that means enabling companies to employ workers at their own discretion according to the market situation and as cheaply as possible – in other words, employees are the losers. Labour market policies are following this maxim all over Europe, according to Mr. Weber, and “precariousness is the logical result.”

There has indeed been a wave of deregulation affecting EU countries’ labour laws over the last two decades or so, and it continues to this day. Just since 2008 the International Labour Organisation (ILO) has counted more than 400 changes of national labour market rules. And most of these structural reforms, as they are called in economists’ jargon, follow the same recipe: if workers are sufficiently flexible and cheap, then companies create new jobs, unemployment falls, and the economy grows.

That was also the logic behind the so-called “Agenda 2010”, with which the government of former Federal Chancellor Gerhard Schröder sought to break up what he called “ossified structures” in the labour market.Indeed, Mr. Schröder used the words “flexibility” and “making flexible” no fewer than eight times during his government declaration on the subject in March 2003. And so temporary employment was “freed of bureaucratic restrictions”, and the upper limit for temporary work at start-ups was extended to 4 years. Low-wage and mini jobs were given favourable treatment by the taxman, and the unemployed were forced to accept any job offer, no matter how badly paid. Parallel to this, countless companies opted out of collective wage agreements and used contract workers, part-time and temporary workers to push down their wage bills.

To this day, this is seen all over Europe as a big success. The unemployment rate fell to its lowest level since reunification. That is why politicians in other European countries like to point to the German model when they want to further deregulate their domestic labour market. Chancellor Merkel also likes to extol the virtues of German “reforms”. It was only after these reforms that Germany “was able to pull away from France,“ Ms. Merkel claimed last May.

But the story of the German jobs miracle is misleading. It is true that the number of people in employment increased by more than 10 percent between 2003 and the end of 2016 from 39 to 43 million. But this was achieved mainly by replacing full-time jobs by part-time and mini jobs. In fact, actual working time did not increase at all up to 2010; the work was just spread over more people.” And also since the economic climate improved in 2011, the volume of work has been growing much more slowly than employment and is still below the levels of the early 1990s. And that is why in 2016, 4.8 million people in Germany were living entirely from mini jobs. A further 1.5 million are working against their will in part-time jobs. And then there are around 1 million contract workers and more than 2 million self-employed without employees, and most of them do not have enough work.

The “industrial reserve army“ of the unemployed, as Karl Marx once called them, “was reduced in size at the price of a growth in the reserve army of the under-employed in part-time work and the over-employed who have to do several jobs to get by.” That is how the economic sociologist Oliver Nachtwey, author of the bestseller “The Decline Society”, describes the result.

The so-called German miracle thus condemned millions to a life on the poverty line. That means they have to get by on less than 60 percent of average income, about €1,070 per month. Despite the high rate of employment this proportion of the population has been growing for 18 years and has now reached 16 percent. And even a large proportion of those in full-time employment have been left behind. After deductions for inflation, the lower 40 percent of wage earners in Germany earned in 2016 less than they did 20 years ago, as the federal government had to concede in a report on poverty and affluence. And that is why the “Financial Times” called the German miracle “just a myth”.

The same conclusion was reached by Christian Odendahl, head economist of the business-related Centre for European Reform, which drew up a thorough clarification for the benefit of the English-speaking world.

However, the real strength of the German model was shown in 2009 during the recession, following the Lehman crash the year before Whereas many millions of people all over the world lost their jobs, German companies switched to short-time work, reduced their employees’ working hours by drawing down their internal work time accounts filled with overtime worked before and with supporting payment by the unemployment insurance, so there were hardly any job losses. When the economic climate improved again, they were easily able to ramp up their production and increase their market share. “So it was the exact opposite of the external flexibility dogma,” of the Schröder agenda, “which saved the German labour market in the crisis,” concludes the economist Stefan Lehndorf of the Institute for Labour and Qualification at the University of Duisburg. “Internal flexibility,” negotiated with and not against the workforce, prevented unemployment. In that respect, he says it is a “bitter irony” that Germany to this day is held up as a role model “for the wrong reasons.”


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