HR in perspective across Europe
A brief look at the economic and social context of the fifteen longer-established EU member states.
Austria joined the EU in 1995. It has benefited greatly from being both physically and linguistically close to Germany and it holds a key position on transalpine transport routes. This small, but highly efficient, central European state has a well-developed system of labour relations, a high level of employee involvement and a welfare system that, although generous, nevertheless incorporates a sufficient incentive to remain in work.
The Benelux countries (Belgium, Luxembourg and the Netherlands) provide a well-ordered and generally stable environment for enterprises. Belgium's employment laws are still based on a needless division between blue and white-collar workers, and there are complex thresholds determining the operation of certain legal rights. The Dutch welfare system has tended to encourage absenteeism, but it is currently being modified to improve the incentive to work. The best example provided by the Netherlands for accession states is in its highly diverse cultural mix and tolerant attitudes towards minority ethnic groups, which are reinforced in the workplace by highly effective equal opportunity laws.
Denmark has driven up its wage levels to be the highest in the world by heavily taxing employees and relying heavily on collective bargaining to regulate pay and employment conditions. However, it has one of the most skilled workforces in Europe and has been a pioneer in flexible working methods. This has helped Denmark to achieve high, sustained productivity levels in recent years.
Finland joined the EU in 1995. It has few natural resources and a complex language that could easily have become a barrier to international trade. However, it has been able to take full advantage of EU and eurozone membership to achieve a low level of price inflation and invest in its human capital to produce a highly skilled workforce. The Finnish economy has also benefitted by employers being able to tap into a ready supply of labour from the Baltic states.
France has low level of unionisation, but highly militant trade unions. The official stance towards foreign-owned multinational enterprises has often been hostile and there has been a tendency to overreact to corporate restructuring by the application of penal sanctions. The 35-hour week has not been a success and the French government is now trying to unpick itself from many of its past policies.
Germany is the biggest and by far the most successful of the older EU states. During the last two decades it has achieved a difficult transition in its eastern states from a system of state-run monopolies to a modern market economy. Complete integration has not, however, been fully achieved and a c20% wage gap still exists between eastern and western states. Neither has Germany been able to significantly narrow the equal pay gap between male and female employees.
Greece joined the EU in 1981. It continues to be a country with many small employers, generally poor labour relations and governments that have frittered away much of the economic gain from EU accession through unproductive public spending and early retirement schemes. Statutory work obligations are commonly flouted, particularly in leading sectors such as construction. Government employment data is generally weak, out of date and unreliable. Greece relies very heavily upon its tourism and agricultural industries and has not been successful at attracting a sustained volume of major inward investment projects. Moreover, it has never fully exploited its physical location close to major external markets in the Middle East.
Ireland provides the best example within the EU of a small country overcoming its lack of natural resources and peripheral geographical position to become a true 'tiger economy'. This has largely been achieved through a low rate of corporation tax, a sustained inward investment strategy and an open-door policy towards immigrants from central and eastern Europe. Ireland has not focused on being a low-wage location, but has concentrated on minimising bureaucratic burdens and keeping overheads such as social security costs to a minimum.
Italy has overcome many of its past economic and political instability problems, and its most recent reforms have helped to encourage flexibility and open up the labour market. However, it has still not overcome its major north-south economic divide, reduced the bureaucratic burdens that it continues to place on employers, or resolved the inconsistent application of its complex employment laws.
Portugal joined the EU in 1986. Although it has revised its labour laws and introduced a unified labour code, such reforms were far too little and too late to halt an exodus of foreign-owned companies. Negative work attitudes, absenteeism, a highly unequal distribution of incomes, bureaucratic state machinery and an undue emphasis by the government on low-cost labour have all contributed to a poorly functioning industrial base.
Spain joined the European Union in 1986 and was at first a country burdened by poor labour productivity, tight employment protection laws and wage indexation. Although these problems have not entirely disappeared Spain is now western Europe's second tiger economy, with rapid economic expansion driven by a property boom and a plentiful supply of low cost labour from north Africa.
Sweden joined the EU in 1995. During the 70s and early 80s, Sweden had to undertake a major economic restructuring exercise to deal with a decline in its forestry and iron ore mining sectors. Its highly sophisticated and extensive welfare system helped to make this exercise a success. Since accession, however, the Swedish economy has underperformed. This is primarily due to the high tax burden imposed on ordinary workers to sustain the generous welfare provisions, the creation of a dependency culture, and the narrowness of pay differentials.
The United Kingdom operates a very different corporate and work culture from the European continent. It has virtually abandoned sectoral collective bargaining and has been reluctant to embrace formalised systems of employee participation. It has tended to take a minimalist approach to all EU social and employment Directives and has refused to join the eurozone. Although this has helped to encourage the growth of new enterprises, much of the UK's advantage in attracting inward investment has been gained through its cultural and linguistic links with the USA. Labour costs, however, remain high by EU standards and productivity is well below the level that this degree of economic freedom should have achieved.
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