Restructuring in Europe - New study calms fears of job losses

Europe is rapidly losing jobs in the manufacturing sectors. Losses are fuelled by new technology and integration of Asia, Russia and Eastern Europe and Latin America into the world economy. This development is irreversible.

But new jobs are created in sectors such as finance, business service and communication, and employees should not fear ongoing streamlining of European enterprises.

This is the conclusion in a new European study on the job effects of business streamlining, carried out by Danish Technological Institute for the European Commission. The political and economic challenge is to make restructuring of the European economies as smooth as possible.

Restructuring in Europe - Anticipating its Labour Market Effects (915 KB) 

Growing feelings of job insecurity and calls for protectionism

Rapid change means that feelings of job insecurity are growing, and in several EU member states there are frequent calls for state subsidies to ailing enterprises and for measure to curb competition and limit international trade.

“The worries of affected employees are understandable” says Dr. Haahr, who managed of the project. “"But it is also an inescapable fact that ongoing adaptation of enterprises to new circumstances is the cornerstone of our prosperity”. Each decade has had its “restructuring scare”, he argues, from worries about automation in the 1960s to the threat of the “Asian Tigers” in the 1980s. “Outsourcing” and “offshoring” are the scares of the new millennium.

Policies should create good conditions for job growth

Rather than state support and protectionism, the study concludes that the right answer to rapid change is forward looking policies. The right answer to intensified competition is not to limit competition – but to equip the workforce and enterprises to cope with it, and to create conditions where most enterprises can grow, even if some must succumb.

Dynamic labour markets possible in welfare states

“We are not arguing for some form of laissez-faire liberalism” stresses Dr. Haahr. “It is certainly possible to combine a generous welfare state with a flexible and dynamic economy. But for this to be possible, public spending should be used offensively to improve the framework conditions for creating new jobs, and not defensively to intervene with restruc­turing processes in the private sector or to prop up ailing enterprises”.

‘Flexicurity’ is promising approach

Forward looking policies can succeed in achieving this. The study points to recent experi­ences in countries such as Denmark, Finland, the Netherlands and the United Kingdom as evidence.

’Flexicurity’-approaches, where liberal employment protection legislation is combined with a benefit system and significant investment in lifelong learning, is seen as a promising approach. “Flexicurity makes possible the necessary smooth adaptation of European businesses, while upholding social cohesion. The point is to move from job protection - in the form of protective employment legislation – towards employment protection – where there is a commitment to guarantee the continues employability of each individual”.