The European Union Center of the University of Wisconsin-Madison
Directors: Jonathan Zeitlin and David Trubek

“Work, Welfare, and Governance in Europe and the United States:
A Transatlantic Dialogue”

Proposal for an Academic Workshop, Public Conference, and Edited Book

Few problems loom larger in contemporary European policy debates – or in US perceptions of the EU – than the interrelationship between labor market institutions, public welfare policies, and employment. Critics on both sides of the Atlantic point to Europe’s supposedly “inflexible” labor markets and “excessively generous” social welfare systems as reasons why Europe has higher levels of unemployment and lower rates of job creation than the United States. Many fear too that European Economic and Monetary Union will exacerbate such disparities by integrating within a single currency zone countries with widely different standards of wages, productivity, and social benefits but without US levels of job mobility and interregional transfers to compensate for asymmetric shocks. Yet a growing body of scholarship suggests that European realities may be more complex. Not only are average levels of earnings inequality much lower in most EU member states than in the US, but there appears to be no close statistical correlation within Europe itself between high levels of employment protection or social welfare provision on the one hand and high rates of unemployment on the other. A number of European countries have sharply reduced unemployment to near-US levels during the late 1990s without sharp increases in inequality through various combinations of consensual wage restraint, negotiated reform of public welfare programs, labor market activation policies, and intensive training/retraining efforts. While the EU and its member states undoubtedly have much to learn from the United States’ extraordinary record of job creation, they may also be able to teach the US a lot about the role of labor market equity and social protection in sustaining popular support for continued deepening of international economic integration.

The European Union Center of the University of Wisconsin-Madison will hold a small academic workshop on this theme in Madison in April of 2000 with participation from a select group of leading European and American scholars. Participants will be asked to produce short preparatory texts for discussion at the workshop, which will be then developed into longer formal papers to be presented at a larger conference open to the public to be held in Madison in April 2001. The revised proceedings of the conference will form the basis of a collective volume, to be edited by the center directors Jonathan Zeitlin and David Trubek for eventual publication by a major university press. A list of participants in the April 2000 workshop is attached below.

Both the preparatory workshop and larger public conference will focus on three key interrelated subthemes. First, we will examine the interactions between industrial relations, skill formation, and social welfare regimes in shaping labor market outcomes and performance in Europe and the United States. How tightly coupled are these regimes and what are the consequences for reform of employment and welfare policies in different national settings? Do major reform initiatives like the expansion of low-waged service employment for low-skilled workers in Germany or welfare-to-work policies in the United States require for their success far-reaching, coordinated shifts in related institutional domains such as benefit systems and collective bargaining arrangements or child care provision, health insurance, and training? How far, conversely, can incremental adjustments in the fit between wage bargaining, employment rights, benefit entitlements, and training provision yield large cumulative improvements in labor market performance, as appears to have occurred in some European countries such as Denmark and the Netherlands? To what extent, finally, can policies which have proved effective in reducing unemployment and improving the job prospects of low-skilled workers in a particular national context be extended to other advanced economies, whether within the same family of welfare-state, industrial relations, and skill-formation regimes, or more generally?

Secondly, we will consider the changing roles, both positive and normative, of different levels of labor market and welfare-state governance in Europe and the United States. How do regulatory capacities, decision-making powers, and policy initiatives fit together at different levels – supranational, national, and subnational (regional/local) in the EU; federal, state, and local in the US? How far are these different levels of governance mutually supportive, competitive, or simply disconnected from one another, and to what extent do the interactions between them vary across distinct policy domains? Within Europe, what has been the impact on industrial relations, welfare systems, and labor markets at national and regional levels of recent EU policy innovations such as the single currency, the social dialogue/social agreement procedure, or the Works Council and Abnormal Work directives, as well as longer-standing measures like the Social Cohesion Funds? Do national governments and industrial relations actors nonetheless continue to play a crucial part in sustaining employment and welfare provision by orchestrating social pacts and negotiating reform of benefit systems? Within the United States, what have been the effects, actual and potential, of recent Federal initiatives in areas such as vocational training, manufacturing extension, and the minimum wage? How far are the dynamics of local labor markets and firm-level industrial relations shaped by distinctive features of federal-level regulation, such as the weak and decaying framework of collective labor law, the absence of national health insurance, or the growing juridification of individual rights against employment discrimination? How have the states coped with the increased devolution to them of responsibility for economic and social policies, including most notably the implementation of welfare reform? In most European countries as in the US, regions and localities have emerged as key sites for the integration of training, welfare, and employment policies, based on the capacities, real or assumed, of public and private actors within them to craft customized solutions to wider problems through decentralized knowledge and consensus formation. What are the possibilities and limits of this approach, what cross-national similarities and differences do we observe in its implementation, and what lessons can European and American policy makers and labor market actors learn from one another’s experiences at this level?

Finally, we will explore the interplay between and effectiveness of different forms or mechanisms of governance in labor markets and social welfare provision. Over the past two decades, many national governments – notably but by no means exclusively the US and the UK – and supranational bodies – including to a significant extent the Commission of the European Union – have placed growing emphasis on market mechanisms such as privatization, deregulation, and competition as means of creating employment and improving the performance of welfare systems. Yet labor markets famously lack most of the characteristics theoretically necessary for market efficiency, such as transparency and complete information, perfect competition and equality of bargaining power among participants, standard product definitions, or secondary markets for futures and derivatives. Hence it is widely – though by no means of course universally – agreed that labor markets can only function effectively as markets if they are embedded in a broad institutional framework, including both individual and collective employment law, together with a welfare system overseen if not provided directly by the state. But there is also widespread recognition that states and bureaucratic agencies typically lack that combination of flexibility, responsiveness, and local knowledge increasingly regarded as necessary for successful adaptation of national regulations and programs to the ever more complex, differentiated, and volatile worlds of work and family life. These symmetrical deficiencies of unregulated markets and public bureaucracies have in turn inspired a variety of experiments with intermediary institutions – from neo-corporatist concertation among traditional representative associations of capital and labor to looser and more pluralistic local partnerships and networks – aimed at negotiating an improved interface between households, firms, and state agencies in the labor market and the welfare system. At the same time, however, the diffusion of such concertative procedures and partnerships as mechanisms for public policy making raise thorny questions of inclusiveness, accountability, and effectiveness on both sides of the Atlantic. Which actors and organizations are or should be entitled to participate in these deliberative fora, from the European Social Dialogue through national social pacts to local partnerships, and how can we ensure that their decisions take sufficient account of the public interest, however that may be defined? Does the inclusion of a wider range of groups such as representatives of the unemployed, welfare claimants, women, or ethnic minorities enhance the legitimacy of such concertative arrangements at the expense of their decision-making effectiveness? How far can such partnerships thrive in neo-liberal environments like those of the US or the UK where the organizations of business and labor interests are fragmented and weakly developed? And how can policymakers and interest organizations, whether in Europe or the United States, balance the autonomy and discretion needed to support local initiatives with collective learning and continuous performance improvement through generalization of best practice? Such questions, finally, raise a further query: how far can the reform of labor markets and welfare systems in the EU and the US profitably draw on new types of information-based regulation, rolling best-practice standards, and “learning by monitoring” which have recently begun to diffuse on either side of the Atlantic in areas as diverse as environmental policy, health care, and skill certification?