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Meeting the challenges of economic uncertainty and sustainability through employment, industrial relations, social and environmental policies in European countries

Final Report Summary - GUSTO (Meeting the challenges of economic uncertainty and sustainability through employment, industrial relations, social and environmental policies in European countries)

Executive summary:

The Governance of Uncertainty and Sustainability: Tensions and Opportunities

The work of EU research project GUSTO

The central purpose of the GUSTO project (The Governance of Uncertainty and Sustainability: Tensions and Opportunities) has been to explore ways in which economic uncertainty in the lives of the European population can be managed consistently with growing economic efficiency and innovation. It has brought together labour market and social policy researchers from the Czech Republic, Denmark, France, Germany, Hungary, Italy, the Netherlands, Slovakia, Spain, the UK, and also Canada.

Its research has focused on uncertainty in labour markets in the following policy areas:
- Immigration
- Pensions
- Collective bargaining
- Local employment strategies and territorial governance
- The role of the EU
- Individuals' labour market transitions

A significant gap has appeared between progress in the European Union's marketization agenda and that for the development of European social citizenship. While the former advances steadily, the latter has stalled, and in many respects has moved into reverse. European integration requires both processes. While markets internalize and manage many aspects of economic activity, they also create and leave as neglected any negative consequences that are not themselves part of other market transactions. The extension of markets therefore increases the need for non-market institutions capable of taking care of these externalities.

A renewed social Europe strategy must recognize the obligation to reform and revise social and environmental protections in ways that confront the new negative externalities being created by the new waves of marketization. Uncertainty is endemic and necessary to dynamic market economies, but it creates shocks that damage people's economic confidence and their wider lives. This damage constitutes an externality to which public policy needs to respond. For the European Union itself, whose internal democracy is young and undeveloped, there are particular risks of widespread disillusion if public policy fails to do this, which make it difficult to achieve Europe-wide solidarity at a time when it is particularly needed.

Three parts of the GUSTO work programme tackled particularly sensitive questions in the management of uncertainty: immigration, the point where the definition of outsiders as the bearers of most uncertainty and the recipients of least security is often at its sharpest; pensions: historically central to security provision, but increasingly seen as having sustainability issues, and a point where conflicts between investors and workers are concentrated as the controversy over defined contributions schemes shows; sectorial and local governance of uncertainty, including the particularly conflictual field of collective bargaining. Further work packages dealt with: the treatment of these and other social issues at the level of the EU itself and its institutions; and with tracking individuals' experiences of labour markets and social policy through their labour market transitions as measured by national labour surveys.

In addition to a mass of empirical findings, the GUSTO research also produced many policy ideas for rebalancing the marketization project.

Project Context and Objectives:

Coping with economic uncertainty while seeking security is a central dilemma of public policy in a globalising economy. Already the case before the end of the 20th century, the dilemma has been considerably sharpened and made more difficult by the financial crisis of 2008 and the consequent crisis in the Eurozone.

A complex set of deals and conflicts are involved in the process of distributing the gains and the burdens of that uncertainty, and various forms of employment contracts and labour and social policies express their outcome. This project is concerned with the study of that process and its implications for societal models. In the course of conflict a number of different institutions engage in new practices; and there is a new diversity of employment forms and tenures. Social policy becomes increasingly integrated with employment and industrial relations practices, while both the sustainability of the institutions themselves and their impact on the natural environment require consideration. Challenges are also presented by the different forms of governance at work in the various policy fields. The crisis of the Keynesian model was often seen as a crisis for associational governance (or neo-corporatism), and an advance for reliance on market governance (usually assisted by strong elements of government intervention). Since then, policy-making by individual large corporations often seems to be replacing associational governance as well as government policy-making in fields of employment categories and rights, pay determination, and the determination of pensions. However, the public goods issues raised by uncertainty and environmental damage bring again into question the adequacy of governance by the market and individual firms. We should expect to find radical changes in the societal models that we have become accustomed to using in the analysis of social policy. There is a search for new modes of governance, or new combinations of old ones.

Meanwhile, a significant gap has appeared between progress in the European Union's marketization agenda and that for the development of European social citizenship. While the former advances steadily, the latter has stalled, and in many respects has moved into reverse. European integration requires both processes. While markets internalize and manage many aspects of economic activity, they also create and leave as neglected any negative consequences that are not themselves part of other market transactions. The extension of markets therefore increases the need for non-market institutions capable of taking care of these externalities. Earlier visions of European integration embraced this concept, seeking to advance European social citizenship alongside the expansion of markets. Gradually however marketization has turned against the citizenship agenda, leaving little at the European level to cope with market externalities. This both creates imbalances in European policy-making and drives ordinary working people back to national defences against Europe, though they then find that the European marketization project is also undermining many of these national institutions. 'Europe' increasingly appears as a hostile force, setting itself against public policies and practices that protect citizens from the negative consequences of economic uncertainty. In particular, people living in the fragile economies of central and southern Europe, face the current major economic and financial crisis in an environment of already intensified inequalities and a declining capacity of public institutions to help them cope with the externalities of global marketization.

The core objective of the GUSTO project was to establish the full array of policies and practices that govern and distribute protection from economic uncertainty in contemporary European and other advanced societies, in order to provide both academic research and public policy-making with detailed knowledge and a classification of such policies and their effects more appropriate to early 21st century societies than existing ones, rooted in the experience of the mid-20th century and earlier. Knowledge derived from the research will make possible appraisal of the achievements and weaknesses of various policy types.

This overall objective was realized through the combined research of its component parts (or Work Packages):
- To establish an initial survey of societal models and to establish the core theoretical perspective of the study, including relating issues of environmental sustainability to the traditional social policy agenda; to locate the main forms of public social policy within a wider framework of concepts of family and values. These were the goals of Work Package 2. They provide an initial answer to the core general objective, amended in the light of the more detailed work.
- To conduct a detailed study of individual data, in order to show how different policies and policy ensembles affect the lives of individuals in different social positions and across different societies. These were the goals of Work Package 3. They contribute to the core general objective by enabling an appraisal of the detailed effects of policies.
- To subject to particularly close scrutiny the relationship to the governance and distribution of economic uncertainty of public policy in two specific areas: pensions and migration. These were the goals of Work Package 4. They contribute to the overall objective by enabling a classification and evaluation of policies in two fields of particular difficulty and political prominence.
- To map the development of policy at European level and the relationship between European and national policies, in order to produce: (1) an historical analysis of EU-level interventions built around the notion of a European Social Model and their impact on policy and collective action since the late 90s; and (2) lessons and recommendations for EU level actors, including a normative analysis of the possibilities of alternative policies at the European level and their contribution to improving national arrangements in the context of changing values and preferences. These were the goals of Work Package 5. They contribute to the overall objective by placing national policies within the wider European framework.
- To investigate the contribution to outcomes in the governance and distribution of uncertainty of two key aspects of the infra-national governance of uncertainty and sustainability: (1) the reorientation of collective bargaining, a central mode of labour market governance, to address questions of competitiveness, flexibility, employment security and environment; and (2) emerging models of regional governance of labour market uncertainty. These were the goals of Work Package 6. The contribute to the core general objective by extending the scope of policy from national government to other key levels of policy relevance, in the same way that WP 5 extends to the European level.
- To integrate the findings of WPs 3-6 into an overall account of the state of the governance of sustainability and uncertainty in contemporary Europe and beyond; to establish a new approach to conceptualising the different societal models emerging from policy choices in the field of the research; to attempt a provisional account of the performance standards being achieved by these different models in optimising the relationship between flexibility, security and environmental sustainability. This is the objective of Work Package 7. Its role is to integrate the work of the other WPs to provide an overall statement of how these together achieve the core general objective.

Project Results:

The Governance of Uncertainty and Sustainability: Tensions and Opportunities

The work of EU research project GUSTO

The central purpose of the GUSTO project (The Governance of Uncertainty and Sustainability: Tensions and Opportunities) has been to explore ways in which economic uncertainty in the lives of the European population can be managed consistently with growing economic efficiency and innovation. It has brought together labour market and social policy researchers from the Czech Republic, Denmark, France, Germany, Hungary, Italy, the Netherlands, Slovakia, Spain, the UK, and also Canada.

Its research has focussed on uncertainty in labour markets in the following policy areas:
- Immigration
- Pensions
- Collective bargaining
- Local employment strategies and territorial governance
- The role of the EU
- Individuals' labour market transitions

Introduction
A significant gap has appeared between progress in the European Union's marketization agenda and that for the development of European social citizenship. While the former advances steadily, the latter has stalled, and in many respects has moved into reverse. European integration requires both processes. While markets internalize and manage many aspects of economic activity, they also create and leave as neglected any negative consequences that are not themselves part of other market transactions. The extension of markets therefore increases the need for non-market institutions capable of taking care of these externalities. Earlier visions of European integration embraced this concept, seeking to advance European social citizenship alongside the expansion of markets. Gradually however marketization has turned against the citizenship agenda, leaving little at the European level to cope with market externalities. This both creates imbalances in European policy-making and drives ordinary working people back to national defences against Europe, though they then find that the European marketization project is also undermining many of these national institutions. 'Europe' increasingly appears as a hostile force, setting itself against public policies and practices that protect citizens from the negative consequences of economic uncertainty. In particular, people living in the fragile economies of central and southern Europe, face the current major economic and financial crisis in an environment of already intensified inequalities and a declining capacity of public institutions to help them cope with the externalities of global marketization.

Most important initiatives in European social policy date from the period when the European Single Market and Economic and Monetary Union were being developed: the logical pairing of marketization with policies for combating externalities anticipated above. However, from the outset elements of the marketization programme both inhibited the development of European social policy and began to attack policies at the national level. First, EMU and the Growth and Stability Pact included social security deficits as public expenditure deficits. This made it nearly impossible to envisage any future expansion in state welfare. This demarcation also recast relations between collective bargaining and welfare states; the European Court decided that any compulsory social insurance contributions were welfare state contributions, and therefore covered by the Pact, while any voluntary contributions were necessarily open to the EU's competition laws. This led European institutions to be highly critical of any proposals to extend social protection systems. Among the many consequences of this has been to deny to trade unions the role in European social policy construction that had been promised them, and to play havoc with many national arrangements.

In the 1990s and 2000s there had been a major policy conflict in many European countries between economists' belief that rigidities in the labour market were causing economic harm, and the dependence of many workers on those rigidities for some protection against economic uncertainty. By the mid 2000s a positive-sum outcome to this conflict seemed to have been found in strategies for 'flexicurity' – originally initiatives of Danish and Dutch social policy, but extended more generally in various diluted forms. While some of these strategies did not fall foul of European marketization, the range of potential policies has been limited by the process, as will be seen at certain points below. Then, following the financial crisis of 2008-09 and the consequent Euro crisis, new sources of major uncertainty have appeared. While their origins lie in the conduct of financial markets rather than of labour markets, it is in the latter and in associated social policy that the burdens are being felt. Reductions in social spending, frequent and destabilizing changes in rules governing pensions and other such spending, constant pressure for flexibilization in labour markets and decentralization of collective bargaining, alongside the continuing destabilizing influence of European policies on national welfare states, are leaving middle- and lower-income families exposed to a new intensification of uncertainty. The search for flexicurity has been blown off course.

In sum, in recent years, and especially since the financial crisis and in particular the crisis of sovereign debt in European economies, European and many national policy makers have driven a more uncompromising marketization policy that no longer accepts the logic of a need to balance the extension of markets with countering their negative externalities. Citizens' rights at work and social policy are being seen in solely negative terms as a constraint on corporations' freedoms; climate change and environmental sustainability have taken a back seat. Following the intensified market turn of EU policy-making and of recent decisions of the European Court, the defence of social rights increasingly takes a national if not nationalist form, as rights established in the past at national level are pitted against a European drive to reduce them. Together these trends produce a negative and backward-looking confrontation between a socially heedless global and European marketization strategy and a defensive national protectionism. This could threaten both the economic strength and political legitimacy of national and European economies.

A renewed social Europe strategy must recognize the obligation to reform and revise social and environmental protections in ways that confront the new negative externalities being created by the new waves of marketization. Uncertainty is endemic and necessary to dynamic market economies, but it creates shocks that damage people's economic confidence and their wider lives. This damage constitutes an externality to which public policy needs to respond. For the European Union itself, whose internal democracy is young and undeveloped, there are particular risks of widespread disillusion if public policy fails to do this, which make it difficult to achieve Europe-wide solidarity at a time when it is particularly needed.

Results of the GUSTO research programme

Three parts of the GUSTO work programme tackled particularly sensitive questions in the management of uncertainty: One work package has addressed migration, the point where the definition of outsiders as the bearers of most uncertainty and the recipients of least security is often at its sharpest. A second has studied issues of pensions: historically central to security provision, but increasingly seen as having sustainability issues, and a point where conflicts between investors and workers (or former workers) are concentrated as the controversy over defined contributions schemes shows. Finally, a third work package, concerned with sectorial and local governance of uncertainty, includes the particularly conflictual field of collective bargaining. Further work packages dealt with: the treatment of these and other social issues at the level of the EU itself and its institutions; and with tracking individuals' experiences of labour markets and social policy through their labour market transitions as measured by national labour surveys.

Immigration
A key finding of our research on migration is that labour market 'assimilation' (in the limited meaning of having wages and contract terms similar to the native population) is more easily achieved by the low-skilled than the highly skilled – but only in periods when an economy is flourishing. During downturns, low-skilled immigrants have a particularly difficult time. They are the main bearers of the burdens of flexibility in the labour market, acting as a buffer that protects the native population from bearing the brunt of instability. The large amount of horizontal mobility that exists among immigrants makes possible adjustment in the labour market and reduces uncertainty for the economy as a whole, but at the cost of exacerbating the unequal distribution of uncertainty between natives and immigrants workers. Migration increases flexibility, contributing to a more elastic labour supply at the expense of increased uncertainty for the migrants. Female immigrants are particularly flexible, remaining in the labour force more consistently than native women, and also reproducing more 'cheaply', as their wages are lower; they tend to work in the very poorly paid and also highly flexible sectors of care services, cleaning and agriculture. Earnings assimilation, where it occurs, seems to take 20 years to achieve. In general, these findings support the hypothesis that migrants play a distinctive role as outsiders in uncertainty governance, enabling members of the host society to secure de facto protection from shocks. This is further confirmed by our case studies on the work of immigrants in health care and construction.

But how sustainable is this flexibility, especially if it depends on political marginalization' Important here is a finding of this work package that immigrants are not, as is often assumed, subjected to exclusion strategies by trade unions. But workers who found their own income situation to be 'difficult' were less likely to have liberal attitudes to immigrants. Feelings, and the reality, of economic insecurity are the most important sources of hostility to immigrants. Given the dependence of modern labour markets on immigrant workers, circumstances that increase uncertainty in workers' lives are likely to be associated with growing social conflict. This report therefore highlights a paradox of globalization: on the one hand it encourages an international mobility of labour; on the other, it produces employment uncertainties that can be used to encourage hostility to migrant workers.

Our research also found, from a survey of 16 countries, that the populations of European societies with strong welfare state and few social inequalities (mainly the Scandinavian countries) have positives attitudes towards immigration; while those in societies with strong social labour market segmentation and weak welfare (such as the UK and Mediterranean countries) have negative attitudes. From this we can conclude that welfare is relevant for immigration policy and integration. The integration policies of immigration are associated with the correction of social inequalities, with the policy of employment, pensions and unemployment benefits. There has been a kind of 'egalitarian compromise' in certain European political cultures, whereby various market-driven disturbances to security – including large-scale immigration – has been accepted because of the cushion of a strong welfare state. It is another example of the phenomenon also presented by the Danish flexicurity compromise.

But the sustainability of the welfare state is in turn dependent on the integration of immigrants. The economic crisis has forced many of them to seek social assistance from local institutions, competing with native workers for benefits and resources. There must therefore be improvements in local social policies, because immigrants concentrate in local areas, in poor neighbourhoods, and have strong local community ties. Even more important is their integration within social protection: unemployment benefits and the training of unemployed workers. Immigrants rapidly lose any social rights because they have precarious jobs, temporary and part-time employment. It is therefore also important for trade unions in their own interests to support non-discrimination policy and social rights in collective bargaining, and in their approach to temporary employment and labour market segmentation. It is not possible to implement the flexicurity paradigm in a labour market with strong segmentation, where immigrant workers form a separate labour force. This may mean that it is necessary to develop social citizenship rights distinct from nationality rights. In the interests of European mobility and integration there needs to be a common European common policy here, which means renewal and improvement of the now neglected post-national discourse, a universalist discourse that is also needed to combat the re-emergence of nationalism. Our comparisons of the link between migration and labour market policies in Canada, Germany and Spain suggests that purely instrumental, labour-centred migration policies are hardly viable for Europe without their matching with social policies to avoid exacerbating the overall level of social uncertainty.

Pensions
In recent years, the European Commission has advocated the establishment of funded pensions to supplement or replace state pension reductions consequent on recent reforms. The pensions research for GUSTO has focused on the impact of financial crisis on funded pension schemes in EU member states and the degree to which pension security and adequacy are or can be safeguarded in the future. The recent financial crises has revealed more clearly the limitations of pension fund capitalism: falling pension fund returns raise levels of uncertainty while in the aftermath of the crisis public debt has increased, limiting welfare state capacity, leading to more curbs on public systems. In some cases (e.g. Hungary, Portugal and Ireland) governments have raided pension funds to shore up public account balances. In others, public occupational pension funds are subject to fiscal repression (e.g. in Poland and Spain, funds are directed to purchase government bonds). In some countries, distinctions between public and private systems are dissolving, and public uncertainty grows as responsibility diffuses. As with the crisis in general, this is a problem of governance as much as of finance.

Governments have always been implicated in the running of private pensions: in the creation of rules, regulations and systems of pension governance designed to mediate adverse effects and to win public trust. Cuts in public pension schemes are changing the state's role from providing pensions to guaranteeing the viability of private schemes. Can public-private pension partnerships create schemes that are economically efficient and socially fair' In what ways, using what instruments – and with what degree of success – have governments tried to make private schemes publicly accountable, to reduce uncertainty and promote pension security' How far have pension providers been converted to public purposes: how are responsibilities to shareholders, contributors and taxpayers apportioned, through what governance mechanisms and with what results' Most importantly, what consequences has the crisis had for governance structures and policies and can a financially secure and socially adequate pension system be devised for an increasingly flexible workforce' Different answers are being reached by different member states.

In the world of pensions, a long period elapses between the acquisition of pension rights or the purchase of a product and its final receipt. In the space of these 40+ years, situations alter, in terms of interest rates, returns on investments and annuity prices on the one hand, in rights to state benefits, taxation regimes and social service charges for the elderly and infirm on the other. The conceit that the individual, however financially literate (or her employer, or the state), can make a rational choice between different pension products to safeguard an adequate income in 40+ years' time is a fiction. Unforeseen events, like the 2008 crisis, exert their own impact. While it is possible that market returns experienced in the 1990s will be restored, this is not certain. Neither governments nor financial markets can offer security on this point. More importantly, demographic ageing remains under-acknowledged. In consequence, both public and private pension systems are in a precarious state: any inspection of fiscal accounts about fiscal promises and corporate accounts about company or insurance promises reveals this.

At the time of writing, the Euro crisis constrains any return to Pay As You Go (PAYG) pensions in those countries with major debt problems. Hence, arguably counter-intuitively, private funded pensions remain at the heart of proposals for old age income security for many of Europe's citizens. The EC's 2010 Green Paper emphasizes how sustainable and adequate pensions require Europe's workers to work longer and to save more for their old age. EU citizens thus face an unenviable choice: in the search for old age security, should faith be placed in commercial agencies (and international financial markets) or in the state' The first invites uncertainty born of market instabilities, the second uncertainty consequent on political opportunism, electoral change and crises in the public finances.

Financial uncertainty necessarily creates market casualties. With rising unemployment, notably among younger generations who are to bear most of the transition costs consequent on the shift from state-funded to market-based schemes taking place in some countries, inter-generational inequalities are growing. Research shows how migrant workers and women are disadvantaged by funded DC schemes: the former as pension portability remains difficult (notably between member states, thanks to tax law and exit charges) and the latter as women live longer, take career breaks for caring purposes and dominate the ranks of part-time workers. Real problems of future pension adequacy are thus faced by the unemployed, women and migrants, that need to be addressed by governments or the social partners either through state regulation of private schemes or compensatory payments from public pensions. Fears of inequitable treatment create political opposition to reform. In Greece, for example, political hostility to funded pensions forced repeated state borrowing on commercial financial markets to shore up the public scheme, fuelling the financial crisis of 2011-12. The depth of the crisis has extended insecurity to those with ostensibly protected pensions: the Netherlands and Switzerland have transformed the basis for calculating future occupational pensions. Expectations are undermined, so uncertainty about future income security is extended.

The attempt to convert commercial providers to social purposes is proving to be a messy business and the crisis has pointed up significant weaknesses. Neither state nor employers nor commercial agencies can offer full pension security. On the political side of the argument, governments are compelled to respect the key political interests of their supporters and are reluctant to deliver bad pension news to ageing electorates with high expectations based on established systems. The result has been delayed reforms and severe downturns in bond markets in consequence (e.g. Greece, Italy). Equally, employers have no wish to extend existing liabilities (hence the promotion of DC supplementary schemes) and trade unions, while protecting their members, do not necessarily secure the interests of potentially excluded social groups and labour market outsiders. Commercial providers offer individual choice, the chance to tailor provision to personal preference and protection of contracts by law. However, they also incur higher costs (e.g. marketing and servicing), and stand accused of mis-selling, default, inflexibility in the face of changing circumstances and prioritizing fund sustainability and shareholder value over better pensions. In consequence, growing stress is placed on state regulation as a solution, to make private providers meet social expectation. The result is arguably less a privatization of pensions than a reconstruction of private provision to serve public purposes. However, the more the state directs private provider operations, the more likely it will be held responsible for future failures. Further, the pressure on fund managers for secure returns (passed on to traders as targets and benchmarks against which performance is assessed) feeds financial market instability, speeds up market trading ('the fidgeting fingers of the hidden hand'), fostering speculation, instability and possibly the next financial crash.

The future of pensions will probably be in the direction of DC schemes, but while these offer individuals some clarity about how their entitlements are calculated, they are also fraught with risks and uncertainty of a kind that present severe challenges to persons on even moderately high incomes. It is important that schemes are designed in a way that shares risk and meet certain minimum standards. To that end, GUSTO has produced and publicized its own Handbook on the design of DC pensions.

Collective bargaining
Our work on collective bargaining dealt mainly with two contrasted sectors – metal-working and hospitals – and with seven countries: France, Germany, Hungary, Italy, the Netherlands, Slovakia, and the UK.

The major findings can be summarized as follows:
- Collective bargaining as a governance form continues to be of significance, but in addressing new as well as old uncertainties trade-offs have increasingly focused on securing employment, or employability, and not only wage improvements
- Contrary to existing assumptions, encompassing and powerful trade unions are not a root cause for creating labour market outsiders. Instead, the current trend towards decentralization of bargaining and weaker trade unions might exactly foster the emergence of insider/outsider cleavages
- Public policies are crucial for promoting sector and company agreements, but at the same time, public policy has also turned into a major factor of uncertainty
- As a consequence of heightened policy and political uncertainties, traditionally sheltered sectors are increasingly losing their privileged place, whereas uncertainties stemming from markets and increasing competition have in some countries bottomed out for traded sectors.
- The financial crisis has prompted a re-nationalization rather than a Europeanization of collective bargaining

Collective bargaining as a governance form
In all the countries covered our findings show a distinct trajectory in the agenda and outcomes of collective bargaining in metalworking over the opening decade of the 21st century. Given metalworking's leading role as an export-based manufacturing sector, this is a trend which is likely to be reflected across other parts of manufacturing as well. The bargaining agenda has increasingly been framed around measures to enhance competitiveness, in which measures to reduce costs and/or increase flexibility are central priorities for employers. The emphasis in negotiations over wages has become one of moderation, in place of the gain-sharing that characterized the productivity bargaining of earlier years. Concomitantly, workforce, and union, attention has increasingly turned to securing guarantees on future employment levels, including commitments to particular investments or production mandates or to anticipative measures to avoid compulsory redundancy, and to measures, addressed to acquisition of skills and on-going training, to promote employability. The effect has been to entrench employment as a further 'general equivalent' (in addition to, and to some extent in place of, wages) against which other measures are traded. On the one hand, the result is a form of concession bargaining in which workers agree to flexibility and/or cost concessions in exchange for some form of employment guarantee. On the other hand, this development evidences the rise of a certain type of integrative agenda in which outcomes can be positive sum. The financial crisis, and the sharp economic downturn which ensued, have served to reinforce this trajectory.

We identified three different aspects of protection from economic uncertainty pursued in crisis-response negotiations: direct protection from economic insecurity; a distinction between long-term maintenance of skills and short-term cuts in wages and/or jobs; and protection from procedural uncertainty, which is also returned to below. The principal trade-off focused on securing short-term reductions in the scale and costs of production against protection of employment. This explains why the decline in output over the sharp economic downturn was accompanied by a decline in employment of a much smaller magnitude. There is considerable evidence that collective bargaining played an important role in underpinning this moderating effect. In several countries, supportive public policy in the form of statutory short-time work and similar schemes, subsidized the wages of the workforces concerned thereby enhancing the capacity of collective negotiators to cope with the effects of market uncertainty.

Uncertainty in rules can be a source of substantive uncertainty, and sustaining enduring procedures can be a means of reducing this. By providing a measure of certainty, sector-level negotiating arrangements, by mapping out the possibilities for further company-level negotiation on crisis-response measures, served to increase the incidence of the latter and to protect against outcomes at company-level that are mainly distributive (workforce concession with no compensating measures from the employer). Multi-employer bargaining provides the most likely framework in which firms can take on the risk of offering both longer-term trade-offs and procedural certainties. However, these substantive and procedural certainties are being qualified by further movement in the process of 'organized decentralization' under which bargaining competence is progressively devolved towards the company within the framework of sector agreements. As a result, the universal standards which prevailed hitherto are being qualified by growing perforation through ever more opening, opt-out and similar clauses in sector agreements and, as noted above, by erosion of their coverage in some countries, notably Germany. The effect of the financial crisis has been to accelerate this direction of travel in some countries, and to trigger break points in others.

In the public services, including the hospitals sector on which our research focused, levels of workforce organization by trade unions have traditionally been high and collective workforce governance mechanisms, either under the sovereign approach resting on statutorily-backed administration by the state or the model employer approach resting on collective bargaining, well entrenched. Immense pressures on these arrangements have, however, been building in most of the seven countries in recent years from wide-ranging reforms to the governance and organization of publicly-provided hospital health care. Influenced by the doctrine of 'new public management', governments have tried to introduce market mechanisms into their formally public hospital services via privatization, corporatization, marketization, decentralization, and managerialization. Our initial expectation therefore was that these changes would produce a break with established state-administered arrangements and collective bargaining forms and patterns, and a decline of bargaining coverage. What our research found, however, was that existing arrangements in six of the seven countries (Germany is the exception) have not been dismantled, but have been modified, reconfigured and even in some cases extended. In some countries collective actors have even increased their bargaining scope (e.g. France and Italy) or the reach of national agreements (e.g. the UK), whereas in other countries, collective actors were actively shaping decentralization of the hospital sectors (e.g. Slovakia). In central eastern Europe, collective agreements in corporatized hospitals continued to imitate public sector bargaining, although the workforce lost its status as public servants (Hungary), and in Slovakia sectorial collective bargaining seems to have survived hospital corporatization largely unchallenged. Government-driven reforms to publicly-provided hospital health care are just one of a number of factors shaping the evolution of collective workforce governance arrangements in hospitals, factors which also include the imperatives of sustaining universal standards in treatment, outsourcing on a basis which does not compromise quality, and actors' own preferences and strategies.

Trade union density
Traditional approaches to the insider/outsider cleavage take it for granted that trade unions will protect their members, who almost by definition are those with relatively secure jobs, at the expense of those unable to access the labour market or at least to gain secure jobs. They might do this directly, by insisting on rules that safeguard existing job-holders at the expense of potential competitors, or indirectly, by raising the price of labour with the result that the overall employment level is lower than it would have been without the union intervention. This might occur because bargaining achieves wage costs above the market rate, or because unions gain employment protection measures that discourage employers from employing further workers. These actions might take place through either collective bargaining or through political lobbying.

However, extensive bargaining coordination and coverage has actually reduced the scope for the emergence of outsiders. To the extent that there exist mechanisms that extend the reach of an agreement to all concerned in a particular sector, and nearly all sectors are covered by collective bargaining, the range of outsiders is restricted to persons who are prevented from gaining access to any employment at all because the terms of agreements raise the cost of employment so that labour markets do not clear. Persistent levels of long-term unemployment are often seen as indicators that such processes are in operation, unemployment being the most extreme form of labour market outsider status.

Where bargaining arrangements are encompassing, we find union bargainers capable of coordination having an interest in reducing the number of unemployed, since unemployment weakens labour's general bargaining power. They therefore try to ensure that they do not seek agreements that force up labour costs to the point where labour markets do not clear. They similarly avoid giving employers incentives to create contract forms beyond the reach of their activities (i.e. the creation of outsider categories within the employed population). Our findings also confirm that countries with limited bargaining coverage and coordination, and which lack extension mechanisms are also the ones that seem to have the most labour market outsiders.

Public policies and uncertainty
Public policies have played an important role in prompting sector and company agreements, this way keeping uncertainty at bay. This has especially become evident in the statutory short-time work schemes referred to above. At the same time, however, public policies have increasingly turned into a factor of uncertainty, which makes it harder for employers and employees to calculate their odds, and develop adequate strategies, let alone coordinate them. Several developments bear evidence to this. First, public policies have changed frequently with the main aim of making labour market and other social policies conform more closely to market norms. This tendency has been reinforced by the current fiscal crisis of the state and the on-going austerity drive. Second, as the crisis unfolds, political controversy around issues of austerity, inequality, and the virtues of market norms has started to emerge, producing political uncertainty. Third, and particularly in central eastern and southern Europe, the very legal foundations on which collective bargaining is built are being rendered uncertain.

Internationalization and the future of traded and sheltered sectors
While the metal sector has been highly exposed to the uncertainties stemming from internationalization and relocation of production and price competitiveness, the hospital sector seems more sheltered. This distinction between traded or exposed and sheltered sector has long been a central tenet of industrial relation literature. However, public sector employees have been exposed to considerable pressure in recent decades, and hence the challenges for collective bargaining. These pressures have taken several forms. First, sheltered sectors are by no means immune from such market pressures as the international mobility of health care workers, international health care tourism, and the introduction of quasi-markets into the sector. There are also the political aspects of the construction of markets. The sheltered character of the public sector cannot simply be derived from the nature of the market pressures; rather, it has to be traced back to conscious political attempts to de-commodify labour, and more recent moves to 're-commodify' it.

Applying this more encompassing understanding of sheltered and exposed sector to our cases, we find that in some countries, collective bargaining arrangements and the interaction of public policies and collective bargaining are now better able to protect firms and workers in the exposed sectors from the effects of turbulence in the international markets in which they compete, than their public/health care sector counterparts. However, given that the burdens of adaptation are also unequally distributed among countries, it is only the traded sectors in the surplus countries where substantive re-sheltering might take place. To some degree, this also holds true for central east European countries, which are small open economies. Their metal sector is highly dependent on Germany, and simultaneously generates a trade surplus, which provides the basis for potential re-sheltering measures. In contrast, for the southern periphery of the Eurozone, which has to restore competitiveness in their traded sectors, this will mean continuing pressures on wages and employment conditions, and employment security. At the same time, austerity measures are placing sever pressure on the wages, working conditions and employment security of public service workers. Employees in these countries live in the worst of all possible worlds, as their sheltered and traded sectors are becoming increasingly exposed at the same time.

The financial crisis and the re-nationalization of collective bargaining
Collective bargaining over crisis-response measures has been largely nationally-framed, while there is only a little evidence of European-level frameworks to address the consequences of the crisis.

Overall our findings show that the capacity for collective action to address different kinds of uncertainty is strongly shaped by institutional context. It is greatest where there is comprehensive workforce coverage of multi-employer arrangements for collective bargaining, and where multi-sector and/or sector agreements establish binding frameworks for subsequent negotiations at company level. Such capacity is highlighted in the agreements establishing and/or implementing short-time working, with financial compensation for workers, concluded in metalworking in northern continental European countries and Italy; also in the comparatively lower incidence of outsiders amongst the workforce amongst these countries. It is noticeably less in a second group of countries with multi-employer bargaining arrangements, but where these do not establish frameworks that are binding at the company level. It is least in those countries with single-employer bargaining arrangements. The financial and economic crisis, by exacerbating existing and creating new problems of uncertainty, points to the need to augment the capacity for collective action. Instead, the neo-liberal agenda framing policy towards institutions that govern the labour market, such as collective bargaining, is pushing towards weakening the multi-employer arrangements on which effective capacity for collective action rests. This is most sharply apparent in the countries experiencing enforced changes as a result of intervention by European and international financial institutions.

Territorial governance
The priority accorded to improving employability opens a policy agenda at local level, as labour markets for the mass of the workforce operate locally, with wide variations within countries. Our study of local governance of economic uncertainty considered a twofold shift: from a central to a decentralized level of regulation and from public to private mechanisms of regulation and redistribution. Concentrating on France, Italy and the UK, it reports that a notable process of devolution enlarged the political space for local actors across a series of relevant topics, such as training, tangible and intangible infrastructures, aids for entrepreneurship and other local collective competition goods, though central government remains important. In each case the experiments gave notable attention to the private sector, promoting forms of involvements of local private stakeholders, such as large firms or private associations in the making of local plans and strategies; and to new actors, such as environmental organizations and the voluntary sector.
These local coalitions are not stable and well defined, but they are variable according to the scope of the process of negotiation - though it is possible to find a bulk of stable actors that play a constant and important role, particularly local government and large firms. In all three countries, local organizations tend to act in partnership, with formalized mechanisms of cooperation, in which the role and the contribution of single actors are well specified. Different partnerships may be located in the same territory, and their composition may be variable according to their objectives.

The European policy-making level
Our work on both pensions and collective bargaining has signalled an important paradox for policy makers: the rapidly changing environment presses them to make frequent policy changes and adjustments in their attempts to manage uncertainty; but frequent policy change is itself a cause of uncertainty. The same conclusion emerges from our work on the role of the EU level in the governance of uncertainty. Legal and regulative uncertainty is itself a form of substantive uncertainty, it is argued, and the EU has created much of this. Especially in the area of labour law and social services of general interest, the application of EU law is a source of overall uncertainty for national actors. Although legal certainty is a principle of EU (and other) law, it is possible to make the assumption that, inasmuch as the systematic implementation of EU law contributes to the destabilization of industrial relations systems, of national labour law, and of the national systems of social protection, such developments bring legal uncertainty for numerous individuals and groups.

The individual level
While our project is primarily concerned with different levels of governance and policy areas, it is a fundamental part of GUSTO's contribution to relate these to their impact on individuals, using data gathered through the national labour force surveys. These enable us to identify when individuals make transitions – into and out of the labour market, from temporary to permanent positions and vice versa, to higher or lower levels of pay. The aim of our research here has been to determine patterns in these movements, to associate them with different causes and different outcomes, and to see if distinctive patterns fit with identifiable groups of countries. This last part is particularly important, given the interest among policy-makers and others in discovering whether particular patterns of labour market regulation and social policy, found in individual countries or groups of countries, are associated with particular patterns of behaviour among individuals. This is the case for the immediate purposes of flexicurity studies, but even more so if we are trying to map broader issues of uncertainty governance.

Conclusions and policy implications
One of the aims of GUSTO was to explore to what extent recent changes, including the 2008 crisis, have altered the standard analysis of different 'social models' among European societies and estimations of their relative performance according to various indicators of 'success'.

Standard public (as opposed to academic) debate usually distinguishes among:
- an Anglophone group associated with neoliberal policies (represented within Europe by Ireland and the UK, but more prominently and outside Europe by the USA);
- a Nordic group associated with social democratic policies of strong universal welfare states and strong trade unions;
- a 'Continental' group with Bismarckian welfare states, often sub-dived into a north-western group (Germany, France, Netherlands, Belgium, Austria):
- a 'Southern' group with more minimal familistic welfare states (Italy, Spain, Portugal, Greece); and
- a rather undifferentiated CEE group, seen as more or less following the neoliberal pattern, but at an early stage.

Policy implications
Some conclusions with strong policy implications have emerged from our work, at least for policy-makers committed to 'high road' strategies. At several points we have seen possibilities for positive-sum and constructive solutions similar to those of the original Danish and Dutch flexicurity achievements. However, the scope for these is frequently undermined by the central thrust of the neoliberal policy frame, and in particular of European marketization policies. It is essential that public policymakers and business interests recognize that the negative externalities of uncertainty, insecurity, anxiety and declining trust that markets can create cannot be resolved through markets themselves unaided by public policy. Therefore marketization increases rather than reduces the need for public policy and public resources that offset these negative consequences without reducing the gains from improved markets. Possibilities for doing this are undermined by the insistence of EU policy that social policy is just another area in which markets must operate, rather than one in which they should be counter-balanced.

Market compensation was already implicit in the Danish flexicurity concept, as discussed above. Less often discussed in accounts of the Danish, and also the Dutch, cases, is the role of social partner organizations, in particular trade unions. Individual Danish workers do not confront their managers without any employment protection, because the majority of them have recourse to union representation that can combat perceived unfairness. This enables individual workers to develop trust that aspects of the employment and social policy system will not operate unfairly against them. It is very difficult for individuals to determine the trustworthiness of complex modern systems. Autonomous representation can help them with this problem. Second, much research on collective bargaining has demonstrated that unions and employers behave most responsibly when they are organized across whole sectors, with links then appearing across sectors and (though rarely) across countries. This requires organizations with extensive reach and high membership levels.

- Employment creation policies need to return to the concept of 'good' jobs and the institutions necessary to lead to an improvement of job quality across Europe, as an alternative to a strategy of 'racing to the bottom' in jobs and working conditions.
- If rights to job security must decline in the interests of flexibility, there has to be a compensating improvement in employment security, as made explicit in the original flexicurity concept. Supiot, looking ahead to the growth of non-standard work going beyond the concept of employment, spoke of the need to consider rights as members of the labour force, requiring, for example, enforceable rights to training, a decent work-life balance, decent working conditions, and participation in discourse about these issues. Individual employers cannot take responsibility for these essentially collective goods. This implies a return to public policy and the role of social partner and civil society organizations.
- Recognition that uncertainty is more difficult to bear, the lower one's income, that uncertainty can be reduced through knowledge, and that knowledge sources need to be trustworthy, draws attention to the role that advisory institutions play in easing acceptance of uncertainty. This happens at all points of change and transition (such as negotiation of new contracts, moving to new and especially remotely located jobs, switching from employment to self-employment).
- Measures are also needed to underpin employers' associations, as individual employers need organizations that can help them address the consequences of the market externalities that competitive imperatives drive them to create.
- Workers are increasingly caught between a national level that is unable to guarantee the rights and institutional viability it offers and a global level that is too remote to offer them anything. The construction of a European level of rights and institutions can serve as an important bridge here, and that is often how the EU is perceived. But recently it has served more as a channel for globalizing forces destroying national institutions than for the erection of European ones. There has to be a return to the earlier process of constructing a set of positive European institutions – not in opposition to the overall marketization strategy, but as a necessary complement to it.
- 'More Europe' is also needed in approaches to immigration. Despite a shared dependence on the economic contribution of immigrants, the practices of member states regarding the criteria for recruitment, hiring and stay of immigrants are contradictory. It has been difficult to combine specific country needs with a common policy. Though a good example was the mass legalization of illegal immigrants to avoid social dumping and the simultaneous application of common EU standards. A new commitment to make national and common needs compatible is needed, so that the policy can be coherent and transparent. Such a policy needs to have a broad approach rather than focusing only on the labour market and the criminalization of illegal immigrants.
- Sustainable security raises particular issues where pensions, or what should better be called 'retirement incomes', are concerned. The burgeoning growth that sustained western European economies in the first three post-war decades will not return, and our understanding of 'retirement' must be revised. Currently workers move from full-time work to full-time retirement. Labour market flexibility to accommodate work-life balance needs to be matched by options for a more gradual withdrawal from work, to enable individuals to stretch retirement income further. This would also help to tackle another, associated problem.

Potential Impact:

We hope that our research might change the approach currently being taken by the EU itself and the governments and many social partners in member states towards helping working people cope with uncertainty during the current prolonged crisis. We are not optimistic of having an early impact, because current dominant approaches are so remote from those that we advocate. However, we hope that our publications and conference, etc presentations will provide other social policy experts in academic, social partner and political spheres with evidence that they can use. As an academic research project, it would not be appropriate for GUSTO as such to become politically engaged.

GUSTO dissemination activities

General:
The main findings of the GUSTO programme were presented at a one-day conference hosted by the European Trade Union Institute (ETUI), Brussels, on 15 February 2012. The conference was attended by social partner representatives, Commission officials, academics and students.

WP2:
Non-academic publications:
Burroni, L. and Keune, M. 2010 'Exploring the conceptual weaknesses of flexicurity: on ambiguity, complementarities, conflicts of interest and reductionism', ETUI Working Paper. Brussels: ETUI
Crouch, C. 2011 'Flexibilität und Sicherheit auf dem Arbeitsmarkt', WSI Mitteilungen, 64: 597-605.

WP3:
A volume is being prepared to bring together the main results of WP3, together with some findings of other WPs, especially WP7, relevant to the issue of the future of European social models. Provisional agreement has been reached with the publishers Edward Elgar. It will be edited by Ruud Muffels and published during 2013 or 2014.

WP4:
Non-academic publications:
Most important is the Handbook for the design of defined contributions pension schemes prepared by Anthony Neuberger. It is planned to give this wide publicity within public and private pensions policy circles. To this end we are seeking to have it published in the British Academy's public policy series. It is currently under review by Academy specialists.

WP 5:
A book bringing together all the work of WP 5 will be published during 2013 as The Sustainability of the European Social Model, edited by J.-C. Barbier, R. Rogowski and F. Colomb, to be published by Edward Elgar,

Researchers from WP 5 met in Paris on 14 October 2010 with French associations and social actors to discuss the impact of EU governance, with regard to OMC inclusion and social services of general interest (public services).

WP 6:
Papers on the results of WP6 research were presented by team members at the following: International Industrial Relations Association (IIRA) European Conference 28 June-1 July 2010 at Copenhagen; workshop organized at the Universitat Autonoma de Barcelona, 25th May 2011; invited lecture, Department of Political Science of the George Washington University, USA, 1 February 2012; and meeting at the German Marshall Fund of the United States, 3 February 2012; 24th Annual Meeting of the Society for the Advancement of Socio-economics (SASE) at MIT-Cambridge, USA, 28-30 June, 2012

List of Websites:

http://www.gusto_project.eu