Growth, Competitiveness and Employment

Jacques Delors *

Following my exposé given to the heads of state and government at the Copenhagen European Council, the Commission was given a mandate to prepare a White Paper on the question of growth, competitiveness and employment as we are entering the twenty-first century. For twenty years now we have seen unemployment rise inexorably apart from the boom years of the late 1980s when firms were investing in anticipation of the 1992 Internal Market. We have to find the causes of our unemployment problem and change. For the Community, I believe that we are dealing here with a question of survival or decline.

This White Paper will be very different from that which started the Internal Market process. It will not be a programme of legislative measures. It will be contain an in-depth analysis of the problems facing us and suggestions on how to improve Europe's performance. If these ideas are found to be good, they would then be implemented largely at national and regional level. It should be recognised, though, that while all Member States in the Community have structural unemployment problems, the reasons differ. It will therefore be important that the White Paper take account of the specific national situations in its recommendations.

It would be premature for me to summarise the contents of the White Paper, because it is being prepared by the Commission now. However, it is clear that there are four principal areas that need to be treated.

How can the Community's competitiveness be reinforced?

The Commission is studying the macroeconomic environment. The most effective use of the Internal Market is an important factor. Monetary questions need to be treated, notably those relating to the level of the dollar and the yen. Competitiveness is also affected by the incorporation of technological progress into the economy through R&D. In particular the passage from pure, fundamental research to developmental and implementational efforts needs to be improved in the Community. In this respect, the biotechnology industry needs special attention. More generally, management procedures must be improved to take better into account technological change through R&D and through training efforts. Finally, labour costs must be looked at.

Growth and its employment content.

The indirect (non-wage) cost of labour is too high, especially for the low-skilled. The Member States should look at the control of social costs and the selectivity (targeting) of payments. It is also clear that ideas according to which some non-wage costs for the low-paid could be transferred to other taxes (for example on pollution) must be examined.

The lesson of the past is that there has been a collective indifference to the rise in unemployment. We have not given enough attention to how to divide the gains from productivity. We should aim to share productivity in order to increase employment.

We should also examine in which sectors there is the greatest potential for higher employment. For example, the service sector, particularly those dealing with so-called "care provision" are likely to respond to growing needs as our society changes. The US has shown that it is possible to combine greater employment with a given level of growth, but we should not fall into the trap of creating a "working poor".

Active labour market policies

Education and training provide the main route to long-term prosperity. In the future, as technology changes at an ever faster pace and as our ways of working change in consequence, we shall have to think more and more in terms of life-long education and training. Going through several changes of skills in a working life is likely to become the rule rather than the exception. The present pattern of work, predominantly in offices or factories, is not immutable.

The employment market should be better organised. In some countries there are more rigid laws on the dismissal of workers than in others. Regulations and practices that act to discourage part-time working can also create rigidities that impede people who want to work part time from finding jobs in firms that are happy to use their flexibility.

It is time to change the way in which these issues are approached. This means reviewing the share of spending on unemployment that is "passive" in nature, moving towards more "active" labour market policies.

Future economic and social progress

One could legitimately ask whether we in Europe have reached the limits of development as mature economies? After all say some we cannot keep consuming so that we all have three cars and five refrigerators.

But the Community has 40m people living below the poverty line. We have 100m people just outside our frontiers with only one third of our wealth. Of all the sources of wealth (natural resources, financial capital, active population, non-physical capital) it is the fourth where the Community has its comparative advantage. It should play the card of non-physical capital.

The White Paper will show to the people of the European Community that it is possible to return to a growth path that brings with it jobs. But this will not be an easy task. It will require profound changes in the way we organise ourselves. It must be built on the twin pillars of solidarity and competitiveness. Solidarity especially to share the gains of productivity more fairly between those that have jobs and those that do not. Competitiveness to continue our present levels of prosperity and the economic and social progress that has brought us.


* President, Commission of the European Communities - rue de la Loi, 200 1049 Brussels