Members' Research Service By / May 13, 2022

Future Shocks 2022: Building a European social model for the 21st century [Policy Podcast]

The European Union already has an outstanding level of social security compared to the rest of the world.

Written by Monika Kiss.

This paper is one of 11 policy responses set out in a new EPRS study which looks first at 15 risks facing the European Union, in the changed context of a world coming out of the coronavirus crisis, but one in which a war has been launched just outside the Union’s borders. The study then looks in greater detail at 11 policy responses the EU could take to address the risks outlined and to strengthen the Union’s resilience to them. It continues a series launched in spring 2020, which sought to identify means to strengthen the European Union’s long-term resilience in the context of recovery from the coronavirus crisis. Read the full study here.

The issue in short: the challenge and the existing gaps

The European Union already has an outstanding level of social security compared to the rest of the world. While the EU constitutes less than 6 % of the world’s population and 20 % of global gross domestic profit (GDP), it accounts for at least 40 % of global public spending on social protection. According to Eurostat, In the EU‑27 in 2020, expenditure on social protection stood at 22.0 % of GDP, at 41.3 % of total global public spending and at €2 943 billion. While the European social model is undoubtedly a unique achievement, it has to be adapted to the challenges of the future to maintain its long-term sustainability.

The coronavirus pandemic, and the ensuing healthcare and lockdown measures taken to limit its spread had far-reaching and lasting consequences for the economy, as well as for society. Forced closures and reduced economic activities led to income losses (and, as a consequence, in-work poverty) or unemployment for a significant part of the population. In some cases, tax-benefit systems and support measures such as short-time work schemes significantly reduced losses in disposable income. However, some households lost a significant part of their income and were exposed to the risk of poverty. They also had to cope with work-life balance problems and a sudden need for adequate digital equipment for teleworking and home-schooling. Social groups who were already vulnerable before the coronavirus – such as migrants, poorer communities and disabled people – were disproportionately impacted by the lockdowns and other responses deployed to tackle the health crisis.

The pandemic has accelerated digitalisation and automation and exacerbated tendencies, problems and risks related to them. Many companies and self-employed people chose to go digital, with a rapid uptake in teleworking, which turned out to be an especially viable option for office employees, despite having its own challenges (for instance the need for technical equipment and technical support, or time management and work-life balance problems). Analysis shows that more highly educated and urban populations (in particular in capital regions), were better placed to work from home. Companies have accelerated the digitalisation of their customer and supply-chain interactions and their internal operations by three to four years. The share of digital or digitally enabled products in their portfolios has accelerated by seven years.

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The rapidly increasing digitalisation raises a series of questions and brings new challenges, in terms of the need for equipment and infrastructure (such as computers and other hardware, broadband internet), but also for at least basic digital skills. In this respect, statistics show growing inequalities between areas, skill levels, age groups and sectors, further disadvantaging, for instance, workers living in rural areas, older workers with a lower level of digital skills, or those who cannot afford adequate digital equipment. According to data from the Digital Skills and Jobs Coalition, about 42 % of Europeans today still do not have a basic level of digital skills. Upskilling and reskilling of workers, especially as regards to digital skills is therefore essential. Without upskilling measures adapted to individuals’ needs and opportunities, an insurmountable gap could emerge between social and age groups, as well as between regions or among Member States.

The EU population is also ageing. The decline in the numbers of live births and increasing longevity are changing steadily the population’s age profile. Consequently, the old age dependency ratio[i] is on the rise, meaning that EU social security pension systems of the EU have to be reconsidered. The question of setting a minimum wage framework to close regional gaps is one of the most analysed and debated economic topics in recent years. The pandemic and the related healthcare and lockdown measures also accelerated the spread of new forms of work: platform work or on-call or portfolio work, for example. To protect workers in atypical work forms from higher risks of unemployment and uncertain social security during crises, stronger emphasis could be placed on the legislation for non-standard work forms and for the self-employed, who were, according to data, the most affected by the pandemic.

Existing policy responses

The European Pillar of Social Rights (or ‘Social Pillar’) was jointly proclaimed and signed by the European Commission, the European Parliament and the Council at the Gothenburg Social Summit in November 2017. It aims to uphold 20 principles and rights, structured around three categories: equal opportunities and access to the labour market; fair working conditions; and social protection and inclusion. The Social Pillar is accompanied by a Social Scoreboard, which initially had 14 headline indicators and 21 secondary indicators in 12 areas, measuring progress in the EU Member States in relation to the principles. The scoreboard was used for the first time in the 2018 European Semester, one of the main parts of the EU’s economic governance framework. In June 2019, as part of the Pillar’s roll-out initiatives, the European Parliament and Council adopted the Directive on transparent and predictable working conditions, addressed insufficient protection for workers in more precarious jobs, while limiting burdens on employers and maintaining labour market adaptability.

In November 2019, the Council adopted the Recommendation on access to social protection for workers and the self-employed. It stresses that ‘in some Member States, certain categories of workers, such as short- and part-time workers, seasonal workers, on-demand workers, platform workers and those on temporary agency contracts or traineeships are excluded from social protection schemes’.

In response to the pandemic’s impact and its implications for health policy, the social sphere and the labour market (un- and underemployment, social security system inadequacy, lack of social protection of workers on non-standard work forms), the Commission launched a new recovery plan on 27 May 2020. This plan highlighted the necessity of a fair and inclusive recovery, paying particular attention to fighting unemployment, improving skills (including digital skills), supporting pay transparency and a fair minimum wage, and taking further steps against tax evasion and avoidance.

In March 2021, the von der Leyen Commission published an action plan on the Social Pillar, setting out concrete initiatives to implement its principles. The action plan called for the mobilisation of all available EU policy tools, ranging from funding programmes and the European Semester, to legislation and policy recommendations in support of Member States’ actions. The action plan also revised the Social Scoreboard to reflect the current political priorities and the recent and upcoming initiatives. It also proposed headline targets for 2030, namely bringing the proportion of people aged 20 to 64 in employment up to at least 78 %, increasing the percentage of adults who participate in training every year to at least 60 %, and reducing the number of people at risk of poverty or social exclusion by at least 15 million. The responsibility for delivering on these targets is shared by the EU institutions, national, regional and local authorities, social partners and civil society. Funding will be ensured via the 2021‑2027 multiannual financial framework and Next Generation EU, in particular the Recovery and Resilience Facility, with monitoring under the European Semester. Concrete initiatives in the framework of the action plan include an EU strategy on the rights of the child together with a European child guarantee scheme; a recommendation on effective active support for employment after the coronavirus crisis (EASE); and a platform of collaboration against homelessness. The European Commission also published a proposal on improving the working conditions of platform workers on 9 December 2021.

The European Commission put forward several initiatives to fulfil its objective of a European education area by 2025. Following the new European skills agenda and the European education area communications, adopted respectively in July and September 2020, the Commission issued two key proposals in December 2021. These aim at improving lifelong learning and employability and reducing skills mismatch and include: a Council recommendation on individual learning accounts, which should help ‘close existing gaps in the access to training for working age adults and empower them to successfully manage labour market transitions’, and a European approach to micro-credentials, with the goal of empowering workers ‘to up- and reskill throughout their entire lives and making sure that all learning experiences are properly valued’. The new digital Europe programme will contribute to advanced digital skills development, while the updated Digital education action plan 2021‑2027 aims at improving digital skills for all − a need made clear during the coronavirus crisis, with technology used at an unprecedented scale in education and training.

The increase in telework and digital platforms also raises issues of privacy and data use. At EU level, employees’ privacy is already protected by the General Data Protection Regulation (GDPR), which requires employees’ consent for the use of tracking software or applications. The issue is also raised in the proposal on improving working conditions for platform workers, which pleads for transparency in digital labour platforms’ use of algorithms, by introducing a requirement for human monitoring to ensure fairness and accountability in algorithmic management, as well as the respect of working conditions.

In the context of the economic and social crisis engendered by the Covid‑19 outbreak, a minimum wage is increasingly considered a useful instrument to ensure fair wages and social inclusion. On 28 October 2020, the European Commission published a proposal on fair minimum wages. The proposed directive aims at promoting collective bargaining on wages in all Member States. For the countries where statutory minimum wages exist, it aims at ensuring that Member States put in place conditions to set statutory minimum wages at adequate levels, while taking account of socio-economic conditions, as well as regional and sectoral differences. Furthermore, the proposed directive aims at promoting compliance, as well as strengthening proportionate enforcement and monitoring in all Member States. The European Parliament adopted its report on 25 November 2021.Interinstitutional negotiations are ongoing.

Figure 34: Building a European social model for the 21st century
Figure 34: Building a European social model for the 21st century

National level initiatives

Social security systems can differ significantly from one Member State to another. National governments are free to determine the features of their own social security systems (benefits provided, conditions for eligibility, calculation of benefits, contributions to be paid). These systems are governed by Regulation (EC) No 883/2004 (currently under revision) on the coordination of social security systems with regard to sickness, maternity and paternity, family, invalidity, unemployment and pre-retirement benefits, and in respect of work-related accidents and diseases, and old-age pensions, as well as Regulation (EC) 987/2009 on the procedure for implementing the former regulation.

Member States can also decide on the scope of legislation on working conditions and social security coverage of workers. They decide whether and to what extent they include workers in atypical work forms, for example. Another example is the employment status of platform workers. The binary system (employed or self-employed) is challenged by the specific characteristics of platform work and bogus self-employment. Ireland, for instance, classifies workers on the basis of a series of tests laid down in case law, while Spain enacts a legal presumption that delivery platform workers are employees. The adoption of the directive on improved working conditions of platform workers will, however, unify this situation in the EU.

The implementation of the Social Pillar’s principles is also primarily a task of the Member States, carried out in close cooperation with social partners and with the support of EU policy tools. These can be ‘hard’ tools (legislation and, economic governance), or ‘soft’ tools (policy development through mutual learning and guidance). Establishing the specific amount of a fair minimum wage, for instance, is a Member State competence, even if mandatory at EU level. Measures to combat demographic decline, or measures and initiatives to provide socially vulnerable people with adequate digital tools is also a Member State competence. Concerning upskilling and reskilling, in particular in the digital area, concrete initiatives are often taken at local or regional level, but backed by a series of EU plans, such as the digital education action plan or the skills agenda, and EU-funding, such as the European Social Fund Plus or the digital Europe programme.

Obstacles to implementation

With internet and digital technologies playing an increasingly important role in our daily lives, the digitalisation of Europe has become one of the EU’s priorities for the coming decade. Yet while the EU is making good progress towards its digital transformation, progress is uneven, with clear differences visible across Europe’s regions. Even though closing this digital divide is of outmost importance, geographical conditions in some regions hinder the expansion of broadband internet or 5G, for instance in mountainous areas, on islands and in outermost regions. Peripheral regions are often also in a less financially advantageous situation, meaning digital development might be an insurmountable obstacle for them. People living in rural areas can also suffer from the paradox of the digital territorial divide: while rural areas need better digital connectivity to make up for their geographical isolation, they actually tend to have lower levels of digital connectivity, with the result that people living in these areas are less digitally connected.

Improving digital connectivity can also tackle tech poverty, (lack of access to technology, training, skills and experience needed due to lack of financial means). However, the digital upskilling of older people also encounters obstacles, such as a lack of access to digital devices or the internet, as well as a lack of skills, self-confidence, motivation and interest, and the onset of physical or cognitive impairments, making digital engagement more challenging.

Further continuing teleworking also poses some dangers. As remote work can be provided from anywhere (except for on-location services), it could lead to outsourcing and social dumping (hiring workers in Member States where wages are lower, or employing workers residing in non-EU countries). This can lead to unfair competition and could be prevented by legislative means.

Policy proposals by experts and stakeholders

Bruegel highlights that social protection arrangements vary greatly among EU countries in terms of efficiency, equity and universality, but also within Member States across different modes of work. For instance, portability of benefits between EU Member States already exists for employees under Regulations (EC) 883/2004 and 987/2009, but not for self-employed workers. Member States could therefore ensure that these entitlements are accumulated, preserved and transferable across all types of employment and different economic sectors – even when individuals accumulate several different employment statuses. The European Commission could also promote consensus and convergence among EU countries on the classification of self-employment, and could identify and promote best practices implemented by Member States. Due to digitalisation, work will be quite different from that for which academic training prepared people. According to Bruegel, this means that schools and training programmes will have to focus not only on the specific narrow skills needed for today’s jobs, but also on broader skills, such as foreign languages, which contribute to flexibility in the future, and that can be applied in many different ways.

Demographic changes mean the EU funding model for social protection is under threat, due to the declining share of the working-age population (contributing to the welfare system), compared to the increasing number of pensioners, who live longer. Under these conditions, it is difficult to expand social coverage to all forms of work (implying increased social protection costs), while there is a shrinking funding base. An unconventional solution, a ‘robot tax‘, has been considered, inter alia by Microsoft.[i] Such a robot tax could be then used to pay for the re-skilling of human workers who have lost their jobs due to automation. However, this idea is controversial, as it could also hinder innovation, reducing European competitiveness and possibly leading to distortions in relative investments in capital versus human labour.

Individual learning accounts (ILAs) are flagship actions under the new European skills agenda and important means to endorse lifelong learning. In its position on ILAs, stakeholders’ association Digital Europe stresses that: ILAs should be available for all working-age individuals, but differentiated. They are financed through four sources: individual contribution, Member States’ public funding, EU funding, and employers’ contributions. Training systems within the ILAs should be specifically designed around adults’ needs to conciliate work, private and family life.

Position of the European Parliament

The European Parliament has always been active in the development of EU action in the field of employment and social policy. Parliament has repeatedly called for a more active social policy, and has supported the Commission’s proposals in this area. On 17 December 2020, the European Parliament adopted a resolution on ‘A strong social Europe for just transitions’. It called for a key social programme, including a strategic framework for achieving a sustainable, fair and inclusive social Europe by 2030. This means incorporating the social pillar within the EU Treaties and adding a protocol providing social rights at the same level as economic freedoms within the single market. It also involved the adoption of a sustainable development and social progress pact, to ensure social and sustainable targets are mandatory, which still has to be put in practice. It also stressed the importance of a revised European Globalisation Adjustment Fund.

The European Parliament has followed the situation of workers in atypical work forms closely in recent years. On 16 September 2021, an own-initiative resolution was adopted on ‘fair working conditions, rights and social protection for platform workers – New forms of employment linked to digital development’. The resolution pleaded for improved working conditions for platform workers, who should benefit from the same rights and social protection as other workers. Parliament argues that an employment relationship should be presumed in the case of platform workers, reversing the burden of proof. Platform workers should benefit from essential and transparent information regarding working conditions and the calculation of fees, and a healthy and safe working environment, with transparent algorithms and data management. The resolution also highlights the right of platform workers to basic training to be provided by the platform and the importance of recognising their skills. The Commission proposal on ‘Improving the working conditions of platform workers’, published on 9 December 2021, includes essential points of the Parliament’s resolution.

The spread of digital technologies and related forms of work, pressures of connectivity at any time and place and high workloads can lead to increased stress levels for workers. Directives at EU level could be useful to help protect workers’ mental health, by securing a right to disconnect at specific times of the day. On 21 January 2021, the European Parliament adopted a legislative-initiative resolution, calling on the Commission to put forward a legislative proposal to secure the right to disconnect. In its resolution of 4 February 2022, on mental health in the digital world of work, the Parliament points out that the pandemic and increased use of digital technologies in the world of work exacerbated problems related to workers’ mental health and emphasises the strong need for a comprehensive EU mental health strategy, taking a cross-sectional approach to mental health issues. In its resolution of February 2019 on a comprehensive European industrial policy on artificial intelligence and robotics, the European Parliament stressed that education curricula must be adapted to automation, including through the establishment of new learning paths and the use of new delivery technologies.

In October 2019, the European Parliament adopted a resolution on employment and social policies in the euro area, calling on the Commission to put forward a legal instrument to ensure that every worker in the Union has a fair minimum wage, which can be set according to national traditions, or through collective agreements or legal provisions. Following this resolution, the European Commission published a proposal on fair minimum wages on 28 October 2020.

In focus
Digital technologies play an increasingly important role in our lives, and the Covid‑19 pandemic further accelerated this phenomenon. However, as different parts of society are not able to adapt themselves in the same way and to the same extent to these technologies, existing social inequalities are also further accentuated. People in low-income households and those belonging to vulnerable social groups are statistically less likely to possess the required technologies (such as broadband internet) and devices than people with higher and more stable incomes. From the point of view of digital connectivity (infrastructure that is needed to deliver digital services) differences between Member States, as well as between different regions in the same Member State, or between rural and urban areas, are obvious. The adequate use of digital technologies requires at least basic digital skills. Demographic breakdowns underline these differences between generations. For instance, according to the Digital Economy and Society Index (DESI), 80 % of young individuals (aged 16‑24) had at least basic digital skills in 2021. In contrast, only 33 % of those aged 55‑74 and 30 % of retired or inactive people possess basic digital skills. There is a need to tackle the risk of an even broader digital divide in these groups. The twin transitions – digital and green – are central elements of the Recovery and Resilience Fund and to Europe’s approach to recovering from Covid‑19. Digital technologies have played an essential role in maintaining economic and social life throughout the pandemic and they are a key factor for a successful transition to a sustainable, post-pandemic economy and society. The RRF Regulation therefore requires that each Member State devotes at least 20 % of the allocation received for its Recovery and Resilience Plan (RRP) to measures fostering the digital transition and/or addressing the resulting challenges. Priority areas include investment in digital public services, digitalisation of businesses, and human capital (digital skills development and online learning, including digital skills in curricula). Other EU instruments that could help narrow the digital divide are the digital education action plan, as well as several actions under the updated skills agenda related to EU support for national upskilling and lifelong learning. It is also important to develop digital connectivity at EU and Member State level. The digital part of the Connecting Europe Facility (CEF Digital) will support and catalyse both public and private investments in digital connectivity infrastructures between 2021 and 2027. It will support investments devoted to safe, secure, and sustainable high-performance infrastructure, in particular Gigabit and 5G networks across the EU.

Possible action

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