Committee Reports > List of Committees > Joint > 1980 > Committee on the Secondary Legislation of the European Communities > Report No. 70 - Work-Sharing

REPORT

Introduction

1. The Joint Committee has considered the Communication (6728/79) sent by the Commission to the Council on 8th May, 1979 on work-sharing and also the related resolutions adopted by the Council on 18th December, 1979 on linked work and training for young persons (O.J. C1, Vol. 23), and the adaptation of working time (O.J. C2, Vol. 23).

2. The concept of work-sharing is concerned with various devices to redistribute the volume of work available so as to increase employment opportunities. Following on the Commission’s Communication of 8th May, 1979 on the subject, the Council of Social Affairs Ministers meeting on 14th and 15th May, 1979 requested the Commission to continue its studies and analyses, taking account of the discussions of the European Council in March, 1979 and guidelines indicated by the Council itself at its meetings on 14th and 15th May, 1979, with a view to establishing a Community framework for work-sharing and to submit any suitable proposals. Following on its meeting of 22nd November, 1979 the Council adopted the resolutions already referred to which are discussed later in this report.

3. This matter has been examined for the Joint Committee by its Sub-Committee on Social, Environmental and Miscellaneous Matters under the Chairmanship of Senator Mary Robinson. The Sub-Committee discussed the question in detail with representatives of the Federated Union of Employers and the Irish Congress of Trade Unions as well as with officials of the Department of Labour and of the former Department of Economic Planning and Development. Moreover, it considered in detail views in writing received from the Department of the Public Service, the Confederation of Irish Industry and the Irish Transport and General Workers’ Union. Finally, it had the opportunity of considering a number of related papers prepared by the European Trade Union Institute and the European Foundation for the Improvement of Living and Working Conditions. The Joint Committee is indebted to Senator Robinson and her Sub-Committee for their work.

Economic Background

4. In the twenty years prior to the 1974/5 recession, world economic performance was impressive. This period experienced sustained growth in demand, vigorous investment and high productivity gains. In these circumstances it was possible to simultaneously increase profits, raise real wages and salaries and reduce working time. In fact all Community countries experienced reductions in working time during this period. The oil crises of 1973/4, and to a lesser extent, of 1979 have contributed to a much changed economic environment however. The high growth rates of the 60’s and early 70’s have been replaced by much more moderate growth rates in the late 70’s insufficient to provide jobs for all those seeking work. It is unlikely that the world economy will return to the high growth rates of the 60’s quickly, particularly in view of the perilous energy situation.

5. At present the Community as a whole is faced with a rapid expansion of the population of working age. The potential supply of labour is expected to increase by between 500,000 and 800,000 workers a year until 1985 though for the Community as a whole the population trend should slow down in the latter half of the decade and should subsequently be reversed. The Commission considers that a growth rate of between 4.5 per cent and 5 per cent a year would be required to improve the employment situation to any extent over the next few years. In its Communication of 8th May, 1979 it gives a projected Community economic growth of about 3 per cent to 3.5 per cent per annum in the next few years (developments since the Communication was prepared would undoubtedly point to even lower growth rates). It is expected, therefore, that Community unemployment will rise above its present 5.5 per cent rate until the middle of the 80’s.

6. Irish population trends are out of line with those in other EEC countries in that our population is not only growing faster but, also, the growth is likely to continue until the end of the century. In the National Economic and Social Council Paper No. 35 (Table A 2) it is projected that the numbers available for employment outside agriculture in Ireland will rise to between 997,000 and 1,050,000 by 1986 compared with the actual level of about 830,000 at work in 1979. This increase is attributable to the present age structure of the population with more than twice as many young people in the age group 15-19 as elderly people in the 60-64 age group. No prospect is seen for any significant change in the 2:1 ratio between school leavers and persons approaching retirement until the end of the century.

7. The prospect of increased unemployment brought about by an expanding labour force and sluggish economic growth has led the Commission to suggest the adoption of work-sharing measures at Community level as a contribution towards providing work for as many as possible. The basic idea of work-sharing is to share out the existing level of output among a greater number of workers. By cutting working time it is hoped that employers will take on extra workers to maintain output. The Commission’s Communication warns, however, that the effect of work-sharing measures is not arithmetical i.e. a 1 per cent reduction in working time does not necessarily mean a 1 per cent rise in employment. Studies in the US have shown that reductions in working time lead to significant productivity increases which can reduce the employment effect by up to 50 per cent.

Commission’s Viewpoint

8. In its Communication of 8th May, 1979 the Commission acknowledges that a work-sharing policy, if it is to make a significant contribution to the employment situation, in the Community must:—

(a)be integrated with the convergence of living and working conditions in the Member States,

(b)not lead to increased public expenditure,

(c)not damage the current recovery in firms’ profitability after the recession,

(d)be reversible,

(e)stem from negotiations between the social partners.

The Commission believes that Community action is necessary to guide the trends for a reduction in working time, which exist in the Member States, towards goals which contribute to the convergence of economic policies. It believes that such goals, while taking account of national and sectoral characteristics, should be as homogeneous as possible and mutually compatible.

9. The Commission considers that Community intervention would be justified in the following areas of work-sharing:—

(i)annual volume of work involving increasing annual leave and reducing the standard working week,

(ii)restricting overtime,

(iii)shift work,

(iv)flexible and early retirement,

(v)right to training,

(vi)increasing part-time work, and

(vii)control of temporary work.

10. The Commission envisages two forms of Community action depending on the subject matter. Firstly it envisages the negotiation of European outline agreements between the social partners at Community level with technical and conciliation assistance from the Commission. The annual duration of work is seen as a suitable subject for such agreements. Secondly, the Commission suggests the adoption of outline directives which would fix common aims but leave detailed arrangements to the individual States. It mentions restrictions on overtime as a possible subject of such a directive.

Council Resolutions

11. The resolutions adopted by the Council on 18th December, 1979 have no legislative force and do not bind the Member States to any particular action. In its Resolution on the re-organisation of working time the Council approves of general guidelines in relation to overtime, flexible retirement, part-time work, temporary work, shift work and annual hours of work and asks the Commission to present (a) its conclusions on the possibilities of developing a Community approach as regards limiting systematic overtime working and reducing actual annual hours of work in the Community, and (b) specific communications on flexible retirement, part-time work and temporary work. It also invites (i) continuing consultation between the Commission and the social partners, and (ii) strengthening contacts between the social partners at Community level with a view to the formulation of a Community approach to the problem.

12. The Council also adopted on 18th December, 1979 a Resolution on linked work and training for young persons. The Resolution contains guidelines for the Member States on (a) content and concept of linked work and training, (b) supervision and recognition of training, (c) remuneration and financial support and (d) working conditions and social protection. The Resolution also asks the Commission to (i) examine the conditions under which the European Social Fund might be associated with action by Member States to develop linked work and training during a period of entry into working life, (ii) monitor the application of the Resolution in the Member States, (iii) afford Member States technical support, (iv) promote the exchange of experience and (v) report to the Council in 1982.

General View of the Joint Committee

13. The Joint Committee’s first impression on examining this matter is that it seems to be impossible to analyse a priori the economic implications of implementing the various work-sharing measures outlined by the Commission. There is no body of knowledge or indeed experience to draw on when trying to assess the impact of any particular work-sharing measure. Further the total inadequacy of statistics relating to working time in Ireland and throughout the Community compounds the problem of analysis. The Joint Committee believes that these conclusions are supported by the Opinion and Report of the Economic Policy Committee presented to the Council on 26th October, 1979.

14. The principal means of increasing employment must be higher economic growth and improved efficiency. However, if, as seems likely, present and future growth prospects fail to generate employment on a scale necessary to absorb an expanding labour force it seems to the Joint Committee that any other strategy capable of improving the employment situation must merit serious consideration. The crucial question is whether the work-sharing measures outlined are capable of filling this role. It may well depend in the last analysis on the commitment of both sides of industry to the idea of work-sharing. On this point the Joint Committee has found a fundamental difference in principle between the employers’ and workers’ representatives in this country.

15. The employers argue that without a division of the income available from employment proportionate to the division of working time the results of work-sharing would be to increase labour costs and so diminish the pool of available employment. Moreover they see the proposals emanating from Brussels as lacking the flexibility required to accommodate the vastly differing nature of the employment problems in the Member States and the predominantly small firm economy of Ireland in particular. In their view it has not been shown that any of the measures suggested would reduce unemployment. Indeed they see them primarily as improvements in conditions of employment and argue that such improvements are not appropriate to European-level decisions.

16. The trade union view on the other hand is that work-sharing, whilst it cannot be the main thrust against unemployment, may have a positive contribution to make. They insist, however, that work-sharing must not be equated with income-sharing. They believe that none of the work-sharing measures being mooted would have more than a marginal effect on costs. They do accept the need for maintaining the competitiveness of Irish firms but consider that, if co-ordinated action is taken at Community level, the impact on unit labour costs should not detrimentally affect any one State more than another. For this reason they favour Community intervention.

17. However difficult it may be to reconcile the views of the social partners, the Joint Committee believes that the question of work-sharing must be pursued if it can be established that it has a fair chance of alleviating a deteriorating employment situation in difficult economic circumstances and at a time of rapid technological change. For this reason it believes that the various measures suggested should be further investigated both at Community and national level. At this junction and in the absence of specific proposals the Joint Committee is not in a position to make a positive recommendation on any of the measures mentioned by the Commission. In relation to these it proposes in this report to confine itself to drawing attention to some aspects which came to its attention during the course of its examination of them.

18. The Joint Committee notes the view of the Commission that, while Community measures should be as homogeneous as possible and mutually compatible, account must be taken of national and sectoral characteristics. The Joint Committee believes that it is very important that any Community intervention should take account of the different states of economic development throughout the Community. As far as Ireland is concerned the Joint Committee considers that if our competitive position is not to be impaired regard must be had to (a) the small size of our industrial firms, (b) the relatively low industrial productivity, (c) the number of branch plants of multi-national firms which must command favourable comparison with plants in other countries, (d) the difficulties Irish firms already experience from increased trade liberalisation, and (e) the threat to traditional Irish industry from exports from developing countries.

19. In the Joint Committee’s opinion it is important that work-sharing should not be pursued at the expense of other methods of increasing employment. In this connection there is evidence to suggest that more flexibility in the Irish labour market could improve employment. There are considerable shortages of skilled labour in certain sectors of Irish industry (electronics, engineering, etc.) and for certain occupational groups (fitters, welders, electronic technicians, electrical engineers, etc.). No doubt these shortages must further hinder the employment by industry of additional skilled and semi-skilled people. The Joint Committee urges that the question of meeting these shortages be given top priority, perhaps, by increasing the number of apprentices, reducing the ratio of apprentices to craftsmen and endeavouring to increase the number of graduates from the engineering departments of the Universities and the Technological Institutes. Moreover the Joint Committee believes that there is evidence to suggest that some of the unemployment in this country is regional in character. Measures to improve geographical mobility such as re-location grants or subsidies would, therefore, appear to merit urgent consideration. Obviously it would be counter-productive to introduce work-sharing in sectors already experiencing manpower shortages.

Duration of Work

20. One work-sharing measure suggested would involve the reduction of the annual duration or annual volume of worker by an extension of paid leave or reduction of actual hours worked a week. The Commission apparently favours duration of work being dealt with in outline agreements. It is worth noting that the standard working week for Irish industry is higher on average than for other EEC countries and the first step would be to bring Irish practice into line with that of the other Member States due regard being had to the need for maintaining the competitiveness of Irish industry. It is an important factor in Irish circumstances that the smaller the number employed by a firm the less likely it is that a reduction in the hours worked per worker will lead to the recruitment of extra staff. Indeed overall the extent to which a reduction in working hours would enable additional workers to be taken on from the ranks of the unemployed or school leavers must be doubtful, at least, in Irish circumstances.

21. At present the National Understanding sets down how far the Irish economy can accommodate reductions in working time in the immediate future and limits reductions in working time to workers who do not have 17 days annual leave and to workers whose existing hours in particular employments are out of line with those prevailing in the industry or region.

Overtime

22. The Commission apparently feels that it is particularly important to restrict regular recourse to overtime, particularly as recourse to overtime could offset any reduction in the working week that might be agreed upon. The European Council at its meeting in March, 1979 considered that a maximum number of hours of overtime should be authorised and that hours worked in excess of the maximum should be compensated by time off. The Joint Committee is informed, however, that as far as Ireland is concerned, there is no evidence of a desire of workers for more leisure time in lieu of earnings.

23. It is necessary to distinguish between systematic and cyclical overtime. Overtime that arises from the seasonal nature of production may be unavoidable but the Joint Committee accepts that reductions in systematic overtime which are not due to labour shortages could lead to increases in employment without increasing unit labour costs. In Ireland where overtime is required to help make up for skill shortages restrictions on overtime could, on the other hand, lead to a loss in output and employment. It should be worthwhile to identify employments in which substantial overtime is worked to see if it is possible in particular cases to move from reliance on long hours to increasing the labour force.

24. The Joint Committee understands that the Government intends to introduce legislation, after consultation with the Employers and Trade Unions, which will reduce the standard working week from 48 hours to 40 hours and limit overtime to 10 hours per week.

Shift Work

25. The scope for increasing employment through an extension of shift work is uncertain. The Joint Committee was informed that there is already a high degree of shift work in industries recently set up in Ireland particularly those of a capital intensive nature. The overriding limitation is of course the demand for the product produced. Whether restrictions on overtime would justify more shifts seem doubtful but it may be that a reduction in the working week in some industries could lead to the employment of an extra shift.

Early and Flexible Retirement

26. With the number of workers approaching retirement age small relative to the number of those with a long working life ahead of them, there may be scope in Ireland for supporting a higher proportion of elderly people in retirement. At present the percentage of elderly people economically active is well above the EEC average. No doubt the sharp reduction in living standards that many Irish workers face on retirement partly explains this. The favourable age structure must be seen, however, in the context of the already high rate of dependency due to the high proportion of children and the relatively small proportion of the population in non-agricultural employment.

27. It is difficult to say what the overall effect of a general early retirement plan would be on employment. The possibility of workers reentering the labour market must be borne in mind. Evidence from early retirement schemes in other countries, particularly Italy, indicates a substantial increase in the numbers of elderly people employed in the “grey” labour market.

Part-time Employment

28. Ideally part-time work should be available for those who want it but whether an increased availability of part-time work would help the general situation is open to doubt. Part-time employment can help where there is a tight labour market situation and the proposition of substituting part-time work for full-time work may be attractive in States with high average earnings. Ireland, however, does not have a tight labour market (although labour bottlenecks occur in segments of the labour market) and it is unlikely that earnings have reached a level in this country which would make the substitution of leisure for work attractive. Encouraging increased part-time employment in this country, because of the low participation rate of married women, could in fact aggravate, rather than alleviate, our unemployment problem. Furthermore many firms might be reluctant to take on temporary or part-time employees because of fears that existing labour legislation would make the consequential costs fixed rather than variable.

Temporary Work

29. The Commission argues that the use of temporary work by some firms often appears to be a way of avoiding requirements laid down by law or collective bargaining governing the protection of employment. It considers that measures aimed at reducing working hours and redistributing work could be weakened if additional labour requirements are satisfied by temporary workers rather than new recruits. Accordingly, it sees control of temporary work as an essential ingredient in the overall strategy.

30. Following on the commitment in the National Understanding a National Hire Agency is to be established by the Minister for Labour. The Agency will be operated by a private limited company. The Agency is to involve itself in the filling of temporary full-time vacancies of all kinds. The Agency will itself employ the workers concerned and will provide these workers to the firms concerned. It will be responsible for the payment of the worker’s wages and his tax and social security deductions together with the other responsibilities placed on employers in relation to workers. After a certain period on work assignments, those registered with the Agency will qualify for a special retainer.

Development of Training

31. The Commission believes that measures designed to meet the training needs of workers can also help curb the rise in the supply of labour. This aspect of the work-sharing proposals is clearly related to Community action on linked work and training for young persons and is one which, in the Joint Committee’s view, merits careful consideration. Training measures, if introduced on a wide enough scale could lead to employment gains as well as helping to reduce structural disparities between supply and demand on the labour market. This is particularly relevant for Ireland where skill shortages exist in sectors of the labour market.

Acknowledgements

32. The Joint Committee wishes to record its appreciation of and express its thanks for the considerable assistance it received in considering the question of work-sharing from the Irish Congress of Trade Unions, The Irish Transport and General Workers’ Union, the Federated Union of Employers and the Confederation of Irish Industry. It acknowledges also the help it received from the papers, published by the European Trade Union Institute and made available to it through the courtesy of the Congress, on the reduction of working hours and overtime and from a paper on shift work supplied by the European Foundation for the Improvement of Living and Working Conditions.

(Signed) DAVID MOLONY,

Acting-Chairman of the Joint Committee.

16th April, 1980.