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Joint Presentation ETHZ- LUMSThe Social Impacts of the Crisis in Europe

Copyright ©2008 ShARE. All Rights Reserved 2

THE IMPACT OF THE CRISIS ON EUROPEAN COMPANIES

Tristan Guigue


Latest data covering the end of 2008 and January and February 2009 show that EU labour markets are starting to react more strongly to the current economic downturn, as recently released data confirm that the EU has entered recession following a marked decline in GDP (by 1.5%) in the fourth quarter of 2008.

Companies have announced substantial job reductions in several sectors in recent months, while business and consumer confidence, job vacancies and firms' employment expectations have generally continued to fall.

However the deterioration in economic sentiment appears less pronounced in February than in previous months, and there are even tentative signs of stabilisation in confidence in retail and financial services together with an improvement in employment expectations in the months ahead in these sectors.

General Outlook

Source: Monthly monitor report of the European Commission


The manufacturing, financial services and transport and communication sectors have been hit hardest by announced job reductions in January and February.

• However, the hotels and restaurants and quarrying sectors announced more job creation than job losses in February, while the retail sector still showed signs of resilience although posting considerably fewer job gains than in the previous month.

Compared with a year ago, unemployment rates have risen in the majority of EU Member States, with the most substantial rises being in the Baltic States, Spain and Ireland. Only four Member States still had lower unemployment rates compared to a year ago, namely Bulgaria, Slovakia, Germany and Poland.

Young people more affected than experienced people.

Men affected more than Women.

By Sectors and Countries



Hiring and Restructuring Trends

Hiring intentions for the first quarter of 2009 have generally worsened, down 2 to 9 %

Overall, between last October and the end of February, 770 restructuring cases were reported, with two-thirds of the announced job cuts taking place in just five Member States, namely the UK (143 000), Poland (43 000), Germany (28 000), Italy (19 000) and the Czech Republic (19 000)

In February the largest restructuring cases involving job losses were in:

• financial services: Royal Bank of Scotland (22 300 jobs) and RSA (1 200) in the UK, ING (2 700) in the Netherlands, HypoVereinsbank (2 500) in Germany and PZU (1 500) in Poland;

• manufacturing: Bumar Labedy (1 600) in Poland, Harman/Becker (1 000) in Germany;

• retail: Stylo (2 500) in the UK;

• transport and communication: Poczta Polska (1 500) in Poland, SR Technics (1 135) in Ireland.



European Companies Situation – Job losses


Each company has different way to handle the crisis but there are some common rules given by the European Commission :

Inform and consult the workers about the economic and social situation and future prospects. Inform and consult the workers in special procedures where collective layoffs or transfers are envisaged

Make sure the workers’ rights are protected

Involve the workers• Make the company’s situation and strategy understood• Explain and give the reasons for change in good time• Allow workers to make their views known

Manage the restructuring process• Look for alternatives to dismissals• Establish a social plan to alleviate the social consequences• Establish monitoring mechanisms

Take care of the future• Anticipate as far as possible the evolution of jobs• Maintain and develop workers’ competences

Management of Crisis within Companies

Source: Department Social Affairs of the European Commission


UNEMPLOYMENT SYSTEMS

Elisa Park

Rafaël Klein


Unemployment in France, Germany and Switzerland

Labor force statistics for the three countries with OECD data

Source : OECD Statistic website consulted on 04.01.2009



Unemployment rates - France

It remains one of the highest in Europe. The current Government is experiencing the Revenu de solidarité active.

Unemployment was already on the rise before the financial crisis heightened. Data showing a jump in the number of jobless people in August.

There could be as many as 52,000 jobs lost during the second semester of 2008, increasing the unemployment rate to 7.4% by the end of the year.

http://en.wikipedia.org/wiki/Revenu_de_solidarit%C3%A9_active



Unemployment rates - Germany

Due to the crisis, the German government bailed out Hypo Real Estate.

In early December German Finance Minister Peer Steinbrück indicated that he does not believe in a "Great Rescue Plan" and indicated reluctance to spend more money addressing the crisis.

http://en.wikipedia.org/wiki/Hypo_Real_Estate



Switzerland has a more flexible job market than neighboring countries and the unemployment rate is very low.

However, the effects of the worldwide economic slowdown have become evident on the Swiss labour market . This is shown on the unemployment level recorded by employment offices .

This particularly – although not only – applies tothe sectors of the economy which are largely dependent on exports.

Unemployment rates - Switzerland

http://en.wikipedia.org/wiki/Job_market

http://en.wikipedia.org/wiki/Unemployment


Situation in Germany


Full service provided by Germany’s biggest public agency

German government gives very highimportance to the unemployment agency

Agency offers the whole range of services forunemployed under a unified framework

• Created in 1927 during the Weimar Republic

• Bigger restructuring and renaming in 2002 as result of unemployment policy reforms

• Centralized (federal) organisation• ca. 98.000 employees• 660 branches and vast internet offer• Budget: €43,7 billions (2007)• Ongoing discussions in public & politics

Allocation of financial aid

Consulting and Mediation: • Free consulting by agency staff• Service partly available in Turkish

Self-information sources: • Employment Information Centre (BiZ)• BERUFENET: Database with job-offers,

linked to external (private) databases• KURSNET: Database with formation &

continuing education offers

Other services: • Psychological & medical service• Service unit for job-seeking abroad

(especially within EU)

Source: Bundesagentur für Arbeit, Bundesministerium für Arbeit und Soziales


Two main approaches to help unemployed peopleto find a new job

Employees are obligated to register at the agency at least 3 months before termination of a job:• Meeting with agency staff mandatory• Active search for new job mandatory

Agency units for specific sectors:• Consulting units for artists, academics, seamen etc.• Agencies directly located in many universities

Information,Consulting

&Mediation


&Mediation

Free formation/ongoing education is granted after receiving “Education Voucher” (Bildungsgutschein):

• Early formation-consulting with agency staff mandatory

• Agency inspects the need for formation (profile screening, psychological test and other sources helping to define requirement)

• Education Voucher on top of financial aid

Formation&

Ongoingeducation

Formation&

Ongoingeducation

Source: Bundesagentur für Arbeit, Merkblätter


Situation in France


After decades of a clustered unemployment systemestablishment of a new single agency in France

One of the new French president’s first reformto unify clustered agency system

Agency in progress of consolidatingall services into a unified framework

• Created in late 2008 after merging ANPE and Unédic/Assédic networks

• Further merger with AFPA formation agency in progress

• Centralized (national) organisation• ca. 45.000 employees• Budget: €2,6 billions (2006, ANPE)• New, unified service for unemployed


Consulting and Mediation: • Free consulting by agency staff

Self-information sources: • En Ligne Pour l’Emploi : Internet chats

with companies and agency staff

Other services: • Unemployment Card to get discounts

(like students)

Source: Pôle emploi, Ministère du Travail, des relations sociales, de la famille, de la solidarité et de la ville


Still clustered and opaque approaches to help unemployed people to find a new job

Registration as unemployed at Assédic:• Meeting with agency staff mandatory• Active search for new job mandatory• Obligation to deal with job offers corresponding to

personal profile


&Mediation


&Mediation

Handled by AFPA agency:• Formation-consulting and validation by Pôle Emploi

staff mandatory to get redirected to AFPA• Subsequent interview with AFPA staff mandatory• Part of Personalized Action Project (CRP, PAP)

For 16 to 25 year olds:• Free 1-2 year formation without any prerequisites to

enter public service (PACTE)

Formation&

Ongoingeducation

Formation&

Ongoingeducation

Source: Pôle emploi, Assédic, Association nationale pour la formation professionnelle des adultes


Situation in Switzerland


Umbrella organisation simplifies federal system

Regional agencies as part ofclustered organisational structure

Agency is service mediator,instead of service provider

• Federal umbrella organisation (SECO) with regional subsidiaries (RAV)

• 130 branches• ca. 2.500 employees• Budget: €270 millions


Consulting and Mediation: • Free consulting by agency staff• Biggest job database in Switzerland

Self-information sources: • Self Service Terminals in RAV braches

Formation & Ongoing education: • Mediation of formation• Internships• ”Learning-by-doing Placements”• “Motivation Term”

Source: SECO - Direktion für Arbeit, RAV


AN INTERNATIONAL SOCIAL CHALLENGE

Adriano Waszyc

Réda Rebib


Keynesian approach

• Solution through investment and consumption• Through industry – France• Through demand increase – UK

Stimuli package

• Short run – managing investments • Long run – maturing on innovative industry

Protectionism

• The temptation is to follow protective measures• But freetrade is the only real solution• Remember protectionism didn’t help at all for the 30s’ crisis…

General Outlook

Sources: Capital & Bilan magazine, International Herald Tribune


How is western industry performing?

Situation• Western Europe second biggest industry pole• More and more relocations:

• Eastern Europe• North Africa• East, South-East, South Asia

Strengths

• High quantity of qualified workforce• Closer to universitarian networks & star-up nests• Free trade within Europe• Closer to costumers

Weeknesses

• Expensive!• Can only strive thanks to major economies of scale or highly specialized products• Often highly overcapacity issues


New challenges

Somehow the issues are still the same… Question are:• How to remain competitive?• How to increase productivity?• How to attract industries?• But crisis accentuated contrasts between European countries themselves and

also the rest of the world.

Despite geopolitical disparities, current strategies:

• Monetary policies• Fiscal incentives• Government steered investments

Outcomes are uncertain

• Consumer consumption, will it increase or will people start saving? • Since Europe is a replacement economy, consumption can only be based on

innovation. • How to manage the ever growing national debt?


Helping rich individuals to evade tax payment is the Swiss finance markets’ real specialty.

Switzerland is the world leader in “offshore private banking” – private banking outside the clients’ country of residence.

Swiss banks, or rather increasingly branches of foreign banks in Switzerland, manage about a third of the wealth in this bank sector worldwide. This is more than 2000 billion francs, with a yearly growth rate estimated at 6 to 6.5 percent.

Bank Secret: Switzerland

Source: Swiss Government


In February UBS has to give 300 names of wealthy US clients to the US fiscal authority.

Mid march the Swiss government decided not to make anymore the distinction between Tax Evasion and Tax Fraud

Basically nothing coarse changed to the Bank Secret Principle. The main changes apply to wealthy foreign people trying to escape their home country tax system.

Bank Secret: What happened recently?


The Swiss finance industry employs about 1.4% of the people in Switzerland and represents 12% of the Swiss GDP.

Private Bankers in Switzerland fears that the new law, making Tax Evasion and Tax Fraud the same, could dry up the off-shore wealth investments in Swiss Banks.

This could have a direct impact on Jobs in this field and Swiss economy.

A solution to keep Switzerland a prime investment place is to stress the service quality and the political stability. Strengths which have already been emphasized for decades.

Bank Secret: Impact on a social level

Source: FinancialWeek, February 24.

Final presentation

Business

monthly monitor

bundesagentur

job mandatoryamp

switzerland

bank secret

swiss banks

financial

ple emploi