‘Fighting poverty and social exclusion - in the global village, in Europe and in Italy Speech by Allan Larsson, Advisor to the DG of ILO DS Conference on Welfare and Social Inclusion Rome, 24-25 January 2003 1. Introduction Let me begin by telling you how pleased I am to be invited to this very important conference. It is a great privilege to have the opportunity to learn from your very vital debate. I wish you all success in turning the ideas of this conference into national policies through your new Manifesto for an alternative Government. I have been invited to talk about prevention as a centrepiece of a strategy for social inclusion, and I understand that you want me to talk about how we shaped the European strategies- the Luxembourg and the Lisbon strategies, on employment and social policy to prevent long term unemployment instead of late and costly interventions to cure the illness. I would like to bring three perspectives to the debate on employment as a way to fight poverty and to promote social inclusion: - first a global perspective, based on the ongoing work in the ILO, the International Labour Organisation in Geneva, - second a European perspective, based on what we know about the success of the European Employment Strategy, - and, finally, a few comments to your debate on the preparations of new Italian policies for employment and social inclusion, some food for thought. 2. Poverty in the global village Let us start in the global village and let us observe some good news about the future. The good news about the future is that, in the next ten years, there will be about one billion young people, today between 5 and 15, who will enter into the working age population. This is the best-educated and trained generation ever. They will be willing to work, they will be looking for a decent job to earn a living for themselves and for their families. These young people represent an enormous potential for economic growth, for prosperity and for the fight against poverty, the real wealth of the world. However, the global village is organised to only utilise this potential partially; today‟s working life offers opportunities to some, but low paid jobs, unemployment and poverty to a great many. This is bad news, for example: First, unemployment is a serious problem in many countries, both developed and developing. 180 million officially registered unemployed in the world today, almost half of them are young people – and this is only the figure in the official statistics. Second, unproductive work is an even bigger problem in the developing world; there has been a significant drop in the percentage of people living in extreme poverty, i.e. living on less than a dollar a day, but still one billion people are very poor, including 550 million ‟working poor‟, most of them young people. Thus many of the people in extreme poverty are not excluded from work life, on the contrary, they work hard and long days, but their work is not organised to give them a decent living. Third, in the next ten years the one billion newcomers will lead to a huge increase in the world labour force. There will be an additional 500 million people, 97 per cent of them in developing countries. Fourth, more than 150 million young men and women are illiterate, most of them in developing countries, where access to basic education, the precondition for training and employability, is still limited. Fifth, there is a widespread discrimination of women in education and training. There are more than 40 countries, in which male literacy rates are 15 points higher than female rate, whilst the gaps are even more striking in secondary education, where the difference is actually growing. Thus, a lot of bad news. However, the good news is that the UN in the Millennium Declaration has identified goals for the international community and for national governments for the next 10-15 years to fight poverty, the greatest global challenge facing the world today, according to the UN. The first of these goals is to half extreme poverty, by the year 2015, i.e. those people whose income is less than $1 a day and who suffer from hunger. When discussing the Millennium goals, we have to keep in mind that the labour market remains the filter through which prosperity and poverty are distributed among citizens. It remains critical therefore to put focus on the impact of globalisation on the labour market. Will it, on global level, be possible to get employment included in the development strategies, or will the global strategies continue to neglect this basic aspect? It is too early to tell, but again we can observe some good news. The new global agenda set in Doha, Monterrey and Johannesburg last year offers a framework to review, rethink and re-orient the policies of the past. It is important to observe how employment was identified in Johannesburg as a central element in a global strategy to fight poverty. In the Political Declaration governments agreed, “to provide assistance to increase income generating employment opportunities, taking into account the International Labour Organisation (ILO) Declaration of Fundamental Principles and Rights at Work". This commitment to employment as a way of fighting poverty is a new and important priority for development strategies. It is a recognition of the fact that the integration of one billion people, young men and women, into employment and into more productive employment is the big challenge in the next ten years for national governments, social partners, civil society, UN agencies and Bretton Woods institutions. There is no quick fix for the reorientation of the policies of the past towards full employment. However, the new global framework offers new opportunities for ambitious initiatives to strengthen employment in global strategies. One way to achieve that is to get the UN-organisations and the Bretton Wood institutions to build global alliances for employment. One such alliance has already been built between the UN, the World Bank and the ILO on the initiative of Secretary General Kofi Annan on youth employment (Youth Employment Network). This initiative has led to a resolution by the UN General Assembly to encourage member states to prepare national reviews and action plans on youth employment, involving civil society, youth organisations and young people in this process. This model of global alliances for employment could be further developed by the global organisations. On global as well as on regional and national level, the social partners will have to play a leading role, focusing the social dialogue on the generation of more and better jobs. More productive jobs require the promotion of change as well as a better management of change – the more policy development the social partners can do together, the more credible, concrete and successful the strategy will be. 3. Social exclusion in the European village Let us now move from the global mountains and the view over all the member states of the UN to the Europe hills in Brussels and let us focus on the European village, on the fifteen Member States of the European Union. The Europe picture is in many ways different from the global picture. The European Social Model makes a great difference, offering higher labour standards, better social protection, more opportunities, than in most other parts of the world. Our definition of poverty is also quite different from the one used for the Millennium Goals; here poverty means income less than 60 per cent of the national average income. However, Europe has for several decades been less successful in creating jobs and fighting unemployment, which has led to social exclusion and poverty. That was the background to the White Paper on growth and employment, signed by Jacques Delors, it was the background to the Swedish initiative in 1997 to include employment in the Treaty, the background to the Luxembourg Summit in 1997 on a European Employment Strategy, and to the Lisbon Summit on a ten year framework for full employment and economic and social progress. We can now register some good news from this process, which wsa driven by Europe‟s centre-left parties. The first piece of good news is that the political blockage of a European programme against social exclusion, engineered by the German government in the mid-90s, has been turned into active support. And is now a much more ambitious process to mobilise Member States to develop their own national action plans for social protection and social inclusion. We have different welfare state regimes in the EU, and we will never see a harmonisation of these systems, but Member States – each with very different starting points - can use the processes of best practice exchange, peer review and common objectives to strengthen social policy where the safety nets still are too week. The second piece of good news is that the Employment Strategy has proved to be successful. That is confirmed by the most recent evaluation of the Strategy and by employment statistics. It is a fact that 12 million new jobs were created between 1995 and 2001, and structural unemployment was reduced by 40 per cent, a great success compared to the first part of the decade. Even during the downturn in 2002 the EU has continued to create jobs- 500.000 additional jobs. The strong focus on employment and the basic ideas of the European strategy have supported this development. There is strong evidence that those Member States, which have undertaken wide ranging reforms, have made the strongest progress. Denmark, Ireland and the Netherlands are highlighted in the Commission Spring report. It is obvious that the preventive strategy against long term unemployment has helped to improve the functioning of the labour market. The preventive strategy is a break with the past, when Member States pursued labour market policies to help the long term unemployed. This meant that people had to become long term unemployed before they were given a new start. Most of Continental Europe had such curative strategies, Italy too, which created, rather than reduced, long term unemployment. The new approach is to give the unemployed a new start before they become long term unemployed, i.e. before 6 months for the young, before 12 months for older people. We can now see the effect of this new approach in countries that had very different starting points like Ireland, Denmark and Spain. The third item of good news is that this support from the European level for progressive policies in the Member States will continue, there is no return. The Convention will most probably confirm that commitment in the new draft Treaty to be presented later this year. 4. Political challenges in the Italian village Let us now move from the hills of Brussels, where we can monitor fifteen Member States, to the hills of Rome, where we have an excellent view not only over one of the most beautiful cities in the world, but also a view of living conditions in the whole of Italy. Is there any good news for Italy? Yes, I think that this conference can be described as good news. It has clearly demonstrated the vitality of your debate, of your commitment to fight exclusion and it shows that Italy, with your approach, will be in the mainstream of European development. You will have a lot of hard work to prepare yourself for the public debate over the next few years and for your next elections. May I offer you some food for thought in your reflection process and your preparations of a Manifesto for an alternative Government, some ideas based on my experience from policy making, mainly from ten years of active involvement in European affairs? I would like to make three points: one is about the links between economic and social policies; the other is about education/training as a way to prevent exclusion and poverty; and the third is about an active labour market as a way of preventing long term unemployment and the need for a strong organisation to implement active labour market policies. Social policy as a productive factor My first point is about the links between social policy and economic policy and I will bring more or less the same message as Piero Fassino and Georgio Ruffolo gave us this morning. There is a widespread view that labour standards - or more generally social policies - are detrimental to job creation and prosperity. But there are also other ways to see social policy. You all know that competition and a productive destruction is necessary in markets for goods and services to improve productivity and prosperity. That means that some enterprises and jobs will be lost, when more productive enterprises are expanding, when new technologies are introduced. This is a matter of fact in a market economy – and the strength of a market economy. However, we also know that in the labour market such a mechanism in many cases would lead to a race to the bottom and to social exclusion. That is the reason why the labour market needs both a policy for human resource development and a social floor in the form of labour standards and social protection measures. Both policies promote the best possibility to prevent a race to the bottom. The labour market is different from the markets for goods and services. The labour market is about people, their education, their skills, their motivation, their capacity to earn a living and buy the goods produced. Social policies are needed and such policies, when well designed, will facilitate change and improve productivity. They do so through different mechanisms. One is that a social floor establishes a productivity level, which enterprises need to meet to be profitable and viable. That will force some enterprises out of business, which leaves more room for more productive enterprises to create new and better jobs. Thus, a social floor puts pressure on enterprises to continuously improve their productivity. Furthermore, a social floor, in the form of labour standards, social protection and decent wages, contributes to the overall economic climate by giving people expectations of a certain degree of stability for jobs and income. In other words, a decent work strategy contributes to replacing an economic and social short term-ism with a long term perspective of growth and development. I would suggest in the preparations for your Manifesto to pay great attention to this link between social and economic policy, design and present your social policy as a contribution to the creation of economic resources, not only as a redistribution of existing resources. Education/training to prevent exclusion Now to my second point, on education and training to prevent exclusion. Here again, I can agree with Piero Fassino (who quoted Bruno Trentin), when he highlighted the fact that the traditional labour market, in which we learnt a craft or profession and then stayed in the same profession all our working lives, has now gone. Today we will move from one job to another, from one profession to another, several times in our lives. My main message is built on the report “Why we need a New Welfare State” (Oxford 2002), by professor Gosta Esping Andersen et al, a book that I recommend as an excellent contribution to your own work. The authors of the book emphasise, that a negative spiral of social exclusion is primarily caused by a lack of access to stable, well-paid employment. They say that it is hardly surprising that policy is focused on either „making work pay‟ or on activation and learning. “The weakness of either is that it typically comes too late. A first and necessary policy must be to invest in improving the quality of jobs. Since it is realistic to expect that our future labour markets will include a fair number of low-end jobs, mobility measures such as lifelong learning and training become crucial so as to avoid entrapment. We know that even the best designed activation policies work poorly if they are primarily remedial. Active training and mobility policies can only be effective if they complement a strategy of prevention and this means, once again, the need for major social investments in childhood and youth. Or, to put it differently, our employment policies need to join hands with our family policies”. One important element in the emerging new labour markets is the use of technology; we are entering into the Information Society with a new and very different technology, compared to the mass manufacturing industry society of the 20th century. This new technology will deeply affect the way we work, where we work, when we work, how we are trained, what we do and how we are paid. Experts tell us that in the next ten years 80 per cent of existing technology will be replaced by new and better technology. At the same time, 20 per cent of the labour force will retire and be replaced with new generations, with new education, training and skills. However, 80 per cent of that workforce, the workforce of 2013, has already left Europe‟s education and training centres. So, in ten years time, 80 per cent of the workforce will have “old” education and training and will have to match 80 per cent new technology. We have to bridge the skills gap, the gap between old education and training. There is a need for the new skills of the Information Society, a major challenge for policy makers all over Europe. When you put the emphasis on the bridging of the skills gap, you put emphasis both the creation of business opportunities and on the prevention of social exclusion. You make social policy a productive factor. Can I add one very concrete example on what you can do to prevent social exclusion? There is strong evidence that school dropouts have problems finding and keeping a job. To high degree long term unemployment and social exclusion are connected with dyslexia, a reading and writing handicap. We know that 10-15 per cent of a country has these problems. That means that of your population between 15 and 64, amounting to around 39 million people, there are 4-6 million people struggling with this handicap. Among your 8 million children age 0-14, there are around one million who already have or will have difficulties, at first at school, then in working life. We also know that there are ways to remedy these problems. First of all by early identification of the problem, second by special provisions in education, third through the use of support mechanisms of computers. This is an area, where you can make a difference, by taking the initiative in your Manifesto to address national policies, but also to take local initiatives into the cities where you govern. Active labour market policies to prevent long term unemployment My third point is about policies to prevent long term unemployment. There is a big challenge for you to embark upon such a strategy. Italy is not in the lead in the implementation of this strategy, on the contrary. You will now have the opportunity to review, rethink and re-orient Italian labour market policies of the past. There is very strong evidence from those countries that have implemented the preventive strategy that it works. We can see it in a radical reduction of long term unemployment in some Member States, like Ireland and Spain. There is a huge potential for reduction in Italy, provided that you apply the same strategy. To be successful, you not only need a preventive strategy and financial resources, but also a good organisation- a well staffed, well trained and well equipped public employment service to deliver an active labour market policy. The Commission has in the Joint Employment report emphasised the need for Italy to modernise her public employment services. That is also a big challenge for you. It takes time to build such an organisation, and this will require an urgent commitment on your part. Let me end by saying that long term unemployment, poverty and social exclusion are not inevitable social phenomena, they are all man made, they are all consequences of a lack of good policies. We now have proof that the European strategy to fight unemployment, long term unemployment and social exclusion works. Member States have demonstrated that this strategy makes a difference; it can serve as an important contribution in your endeavour to reform Italy. Thank you all for your attention!