European Semester 2017: priorities are still investment, structural reforms and fiscal responsibility, with a social twist

EU Semester - compass The European Commission has published the so-called ‘Autumn Package’ starting the European Semester 2017. The Commission sees benefits from the reform paths adopted in the recent years, with an increased employment rate and, for the first time for years, a slight reduction of the risk of poverty and social exclusion. Nevertheless, the Commission maintains its stance that investment is lagging behind in Europe, that structural reforms are still necessary and that public budgets should remain balanced – encouraging however those who have flexibility in their budgets to invest to support growth.

Lower unemployment and risk of poverty and social exclusion

The package contains the Annual Growth Survey (AGS), outlining the priorities for reform in member states, the Joint Employment Report looking at major developments and other documents linked to the budgetary governance of the Monetary Union. In terms of unemployment, the Commission congratulates itself that 8 million new jobs have been created since 2013 and that therefore the employment rate has increased to 71.1 %, making the Europe 2020 target of 75 % attainable.

At the same time, the Commission warns about the fragility of the recovery: it outlines the legacies from the crisis, private debt, macroeconomic imbalances, high debt and unemployment levels for some member states and high levels of inequality and the pressure on social protection systems linked to ageing. Therefore, the Commission outlines its agenda based on the priorities of investment, structural reforms and fiscal ‘responsibility’.

Structural reforms: flexible contracts, reduce segmented labour markets, provide services

In terms of structural reforms, the Commission recommends to invest in skills and especially upskilling to adapt to a changing work environment, all while recommending flexible employment contracts. According to the Commission, ageing puts pressure on labour market and creates the need to adapt labour markets to allow for high employment rates: especially, enhancing the labour market to allow for a more equal participation between men and women. This means for the Commission to ‘ensure access to quality services and in-king benefits, such as childcare, housing, healthcare and long-term care, education and training.’ Training systems should adapt and member states should introduce skills forecasts to orient people who chose vocational and training. As only a minority of workers are offered opportunities for skill developments, the inclusion of flexible learning pathways are important to enhance learning throughout worker’s lives. The Commission announces that the ‘New Skills Agenda for Europe’ puts a particular emphasis on supporting adults who have not reached upper secondary education to acquire skills.

The Commission refers to the importance of income replacement and employment security to increase the participations in labour markets. It notes that rates of poverty and social exclusion, which have increased during the crisis, are again reaching the levels of 2008, which are the baseline of the Europe 2020 Strategy (which aimed to lift an additional 20 million people out of the risk of poverty and social exclusion). The Commission recommends improving the coverage and adequacy of income support schemes, including pensions, social assistance and unemployment benefits, while preserving incentives to work and introduce further requirements for job search and activation measures.

In terms of pension reforms, the Commission recommends to enable and encourage men and women to work longer, for example linking pension ages to life expectancy, while reducing early retirement pathways only to those who are ‘genuinely unable to work longer’. The Commission makes the link to labour market reforms that include life-long learning opportunities and enabling working environments, flexible task allocations and working time schedules, work-life balance in working age. The Commission recommends introducing care credits in pension systems and encourages the spread of supplementary pensions, where adequacy of statutory pensions is a challenge.

To reform health systems, the Commission stresses the importance of preventive, curative and rehabilitation policies. The Commission asks for universal access to healthcare services, all while highlighting the importance of cost-effectiveness. The Commission also notes that it is important to protect people from falling into poverty or social exclusion due to ill-health.

Fiscal sustainability: extend working lives and support complementary pensions

On fiscal sustainability, the Commission stresses that some member states should engage in spending reviews and make sure that their spending is effective, to make debt more sustainable. It also encourages governments to engage in the low-interest environment to lower debt levels if they are high, or to invest to support growth where fiscal space is sufficient. In terms of pension systems, the Commission recommends to enact ‘flanking policies’ to current pension reforms, especially extending working lives, and to support complementary means for retirement incomes. It projects a rise in expenditure for health and long-term care due to population ageing, therefore it recommends policy action to enable individuals to stay healthy for longer and make health systems more ‘effective, accessible and resilient’.

Investment: promote social investment in care and education

On promoting investment, the Commission mainly refers to its project of the Capital Market Union that should encourage capital market financing for SMEs, address vulnerabilities in the banking sector and to engage in risk reduction and risk sharing, for instance through the European Deposit Insurance Scheme. It highlights the role of the Investment Plan for Europe and calls for an extension of this plan. Importantly, the Commission recommends to focus on human capital and social infrastructure for investment, especially long-term care services and childcare to decrease care obligations. It also recommends investment in education and life-long learning to support employability.

AGE assessment and priorities

AGE Platform Europe welcomes the focus of this year’s Annual Growth Survey (AGS) on renewed social investment, including into care infrastructure, and the effort to make labour markets more inclusive by priorities such as adequate minimum incomes, measures to balance work and family life also for carers of dependent people, investment in labour-market related skills and the attention put on the working conditions of older workers in order to make higher retirement ages a reality.

However, many issues of older people remain unaddressed. Instead of linking retirement ages exclusively to life expectancy, they should also take into account healthy life expectancy which has been recently increasing with at a slower pace or in some counties has even decreased. . The recent initiatives from the Commission on health and safety at work, promoting new skills and lifelong learning, on services for the long-term unemployed and on work-life balance have to be tailored as well to the category of older workers if they want to fulfil their promise of life-long employability.

At the same time, health and safety at work as well as strong health promotion and prevention strategies outside of employment are crucial to improve the quality of life of future ageing populations, reduce the burden of health care costs and enhance the sustainability of pension systems. The fact that the domain of health is only briefly outlined in the AGS shows that the priority lacks ambition to effectively enable and support active ageing, and focuses rather on cost effectiveness aspect of public health spending.. More determination is needed to make healthy and independent ageing a reality for as many as possible.

The rate of poverty and social exclusion is still at an alarming level of 23.7 %, and the crude poverty rate does not reflect the realities of groups such as persons who are not yet eligible for pensions and who are unemployed or who have a very low salary, very old persons, whose pension’s value have eroded over time, or older women living alone. For instance, the at-risk-of poverty rate of women between 55 and 64 is of 26.8 %, the overall rate for this age group is 25.3 %, both above the rate of the overall population. Statistics for the very old (85+) are not available. The focus on adequate income support, including pensions, is to be welcomed, but a European-level strategy to fight poverty and social exclusion, at the height of the ambition of the Europe 2020 Strategy’s target of lifting 20 million out of poverty is missing.

For more information, please contact Philippe Seidel, AGE Policy Officer:

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