Critically discuss with special reference to social dumping, the case for and against social charter - Assignment Example

The European Social Charter is a document signed by the members of the Council of Europe in Turin, 18 October 1961 that expresses a position of these countries that the “enjoyment of social rights should be secured without discrimination” on various criteria.The European Social Charter was revised in Strasbourg, 3 May 1996. There have always been queries about whether social charter should be the way to go or not and with this came many arguments and views in respect to looking at a global and European vision. The Charter movement offered many things such as those stated below:

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1) The right to housing

The Charter requires states to carry out housing policies adapted to the needs of families. The revised Charter invites states to reduce homelessness and to provide everyone with access to decent housing at a reasonable price.

2) The right to health

Under the Charter, states must have an effective health care structure for the whole population and implement policies for the prevention of illness. States must also take measures to ensure health and safety at work and supervise their application. The revised Charter lays emphasis on occupational risk and accident prevention.

3) The right to education

The Charter prohibits work for children less than sixteen years of age, particularly in order for them to complete their education. It obliges states to provide free vocational guidance services and a system of both initial and further vocational training. States must make sure that training programs are designed to give everyone access to the labour market. The Charter also states that individual aptitude should be the only condition for access to higher and university education. The revised Charter requires states to guarantee free primary and secondary education.

4) The right to employment

Neither the Charter nor the revised Charter guarantees a job for everyone. Nevertheless, they do put states under an obligation to aim to achieve full employment. They also oblige them to ensure just conditions of employment in relation to remuneration, working hours and health and safety. In the field of professional relations, the Charters guarantee the freedom to form trade unions and employers’ organizations to protect their economic and social interests. Everyone has the right to join or not to join them; in addition, the Charter obliges states to promote joint consultation, collective bargaining, conciliation and voluntary arbitration. In certain circumstances professional disputes may still arise and the Charters recognize the right of the social partners to lead them, in particular through the right to strike.

5) The right to social protection

Under the Charter, states must guarantee the right to the protection of health, social security, social assistance and social services. It lists the special measures which must be taken for the elderly. The revised Charter guarantees the right to protection against poverty and social exclusion.

6) The right to non-discrimination

The Charter prohibits discrimination in the implementation of the rights it protects. It underlines in the various articles concerned that these rights must be ensured without distinction as to sex, age, colour, language, religion, opinions, social origin, health, association with a national minority, etc.

The Social Charter movements, however, focused more on workers and working conditions in the world place. The preamble affirms that ‘the same importance must be attached to the social aspects as to the economic aspects’ of the single market. There are two main reasons for this. Firstly, in terms of social justice, it is felt proper that the internal market should entail improvements in the social rights of citizens as well as benefits for business. Secondly, if certain rights were guaranteed, economic disparities in working conditions across Member States would be reduced. Companies in the common market should work on the basis of the same minimum benefits and rights; otherwise the proper functioning of the market would be hindered by distortions in competition.

The Charter itself has no binding force: it is a declaration of intent and amounts to a set of principles and standards that were implemented by the Commission through the setting-up of an action program. In December 1989, 11 Heads of State or Government, all but the UK adopted the Social Charter. The Charter is formally called the ‘Community Charter of the Fundamental Social Rights of Workers’ and was accepted originally by 11 of the, at that time, 12 Member States. The UK argued that having no Social Charter was better because of low labour costs. Enrolling in to Social Charter would bring high labour costs but countries such as France shared a European view that if some countries were to say yes to Social Charter, they would be in disadvantage to those who say no to it. Europe would seem uncompetitive to countries with a “global vision” such as the UK with no Social Charter.

One of the arguments the British brought up against the Social Charter movement was that, workers would withdraw labour simply because employees would have to pay taxes to have their benefits, so there will eventually be a new equilibrium which justifies a new quantity of labour. However, it was argued back by the French that the supply curve would shift back to the normal equilibrium because they would realize their benefits, the Honesty Theory. However, the British view is a more accurate point of view simply because those who withdraw their labour realize that only those who need benefits get those benefits, for example, maternity leave, those who require time off, and if one doesn’t ever need maternity leave they are still in a sense paying for others to have that benefit.

Moreover, the British argue that another argument is that if employers end up paying taxed benefits, demand in quantity labour will drop so that costs can be absorbed. However, employees would make the supply curve shift again because they would see that employers are paying on the employee’s behalf, so the French have continued.

The concern of introducing Social Charter in Europe also caused Trade Union to be a key essential argument. Looking at the UK’s Trade Union, we can see that it is quite a strong centralized environment with a Trade Union Congress, moreover, with high militancy. If we take Germany as an example of comparison, we see that Germany has a weaker and decentralized Trade union with as low militancy- although Social Charter and benefits is offered with high social wages. In the UK, there is no benefits and low social wages, this means that there is no sense of uniformity so that means Britain would have to start paying high social wages so that countries like Germany wouldn’t be in disadvantage for having high social wages. Britain would need to pay higher total labour costs because since wages equal private wages as well as social benefits, Britain would need to gain this, which is at its disadvantage.

Furthermore, there is a “Black economy” argument. Goods and services that are controlled or forbidden by governments but continue to be bought and sold privately are said to be traded on the black market. Illegal drugs, pornography and some forms of gambling are classic examples of goods and services that trade on the black market. Black markets tend to thrive in highly controlled economies where governments ration many products such as food, gas and luxury goods.

Goods in the black market do not trade in open view of the authorities. When products are banned, they can be smuggled or produced illegally, yielding profits based on demand. Legal goods and services are sometimes traded on the black market to avoid taxes. Some countries have more black economies than others, for example, Germany is 80% White and only 20% Black, whereas Greece is only 40% White and 60 % Black. Germany in this case, would lose out because of its uniformity if Social Charter is imposed on it. If you bring in Britain, which has a big white economy, it would have to commit to bringing up social wages which would also be at its disadvantage. The majority of employees in Greece would be enjoying benefits of both the black market and yet Social benefits.

Finally, we come to an argument known as “adverse selection.” There are two types of contract which you could consider, Moral hazards, which is post-contract and which are for things that are inevitable and yet there is adverse selection which in essence are for things that you know are going to happen for sure, and this is a pre-contract item. If we once again look at the black and white economies, we see that black economies in countries that enjoy the benefits of Social Charter are in advantage.

Which firm has the better advantage? Social Charter would be a disadvantage to firm A simply because those in Black market, firm B, would feel the benefits and gain more out of it especially whilst being in the black market. However, a degree of uniformity is needed so that there is a balance and any disadvantages are weighed out.

Social dumping expresses the concerns that employment will be lost in those states whose higher social standards are reflected in higher average labour costs. Faced with loss of market shares and firm relocation, there will be a downward pressure on social conditions such as wages, social security and minimum labour standards. This fear has led to the demand for minimum wage levels, social security provisions and minimum health safety guarantees to avoid competitive pressures reducing standards to unacceptably low levels. This is where the whole idea of Social Charter began. Although the UK opposed this at first, it eventually joined this movement and has reunited with other European countries in offering employees everywhere benefits so that this sort of fear, or any fear or some sort is banished.