As the workforce increasingly transcends the national container, a European layer of social security becomes more and more necessary.
Economic imbalances between member states of the European Union provide incentives for many to emigrate. The freedoms of the single market set the legal framework. Although regularly working EU citizens enjoy largely the same legal treatment in labor and social law, a growing number work as posted or seasonal workers, cross-border workers or (bogus) self-employed.
By reinforcing posting through the freedom to provide services, the EU Court of Justice (ECJ) has separated access to social security from the workplace. In this sense, efforts to compensate at the national level for the union’s ‘social deficit’ fall short.
Migrant workers are normally covered, if at all, by social security in their country of origin. Member states decide on the scope of the benefits and whether their systems are funded by contributions or taxes. The differences are big: in 2019, spending as a share of gross domestic product ranged from 13.0% in Ireland (although the denominator is inflated there) to 31.4% in France.
The differences in the scale of social security contributions are not only used by companies to obtain competitive advantages where they are lower. Member states support these business models, for example by liberally interpreting the posting rules for companies and granting social insurance status (an A1 certificate) as easily as this is checked for negligence.
Discussions at European level on related issues, such as a European minimum wage or the reform of the Posting of Workers Directive, show the growing importance of social Europe. However, given the great importance of the welfare state for the legitimacy of national governments, the EU’s competence in this field is very limited. The relevant EU regulations conform to coordinating rules, which specify the competent social security system in the case of transnational employees. Some benefits are linked to the place of work, others to the place of residence.
But coordination is not enough. Workers in non-standard jobs are increasingly undercovered. In particular, the freedom to provide services and the freedom of establishment facilitate the exploitation of differences in social security contributions for wage competition, which in turn puts pressure on national social security systems.
The European Commission has launched infringement procedures against the 24 member states for disproportionate restrictions on the freedom to provide services and the freedom of establishment. Details are not yet known, but the commission is presumably referring to criticism of the 2019 report on the application of the Posting of Workers Directive. In this sense, it follows exactly the line of the CJEU. Member states’ efforts to comply with publication rules will be more difficult.
Here it is worth recalling the negotiations with Switzerland. The insistence on employment control by employers and unions, which the commission had deemed “protectionist” and “distorting of the market”, led the Swiss parliament to reject a bilateral framework agreement with the EU. The paradoxical result is that these third countries with efficient control mechanisms for labor protection and social security do not become part of the single market.
This is due to the inconsistent pursuit of the principle of equal protection for work in the same place. Instead of always applying the social legislation of the workplace, the ECJ ruled for the first time in portuguese fever in 1990 that employees could be sent to other member states under the freedom to provide services. Thus, employment and social security are located in the country of origin while working in another country for up to two years. In the country of operation, wages are under pressure: your authorities cannot judge whether the regular employment and economic activity is really in the country of origin or whether the postal company is just a mailbox.
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With the assignment to the member state of the responsibility for social security, social Europe here is purely regulatory and not distributive. Coordination regulations are often reformed taking into account the case law of the CJEU. In its decisions on rights to social benefits, the ECJ prohibits discrimination on the grounds of nationality. However, this does not prevent different cross-border situations from being treated differently.
The treatment changes depending on the benefits of the country of origin and its exportability. Given the possibility of looking for work in another Member State with exportable unemployment benefit, the differences are striking. For example, payments from the Danish social security system allow for transitional maintenance in all other member states, while support from the poorest member states would barely cover the cost of living elsewhere.
EU harmonized minimum standards with upward convergence would be a first countermeasure. Until now, a purely system-level EU distributional task has been seen: stabilize national social security systems or introduce a European unemployment reinsurance scheme. Individual payments through a European layer of social security, to compensate for differences in national coverage and support freedom of movement, have not yet been discussed.
The limits of coordination became particularly apparent during the pandemic. Border closures, different quarantine rules and calculation bases for part-time work allowances, wage replacement and sickness benefits increased the complexity of national social security laws, which were difficult in any case. to understand, and therefore the claims were much more difficult to enforce. .
The reform of the Posting of Workers Directive has covered some loopholes, such as accounting for accommodation as a component of salary. But this does not change the underlying problems.
An increasing proportion of the population has an employment history in more than one member state and circular migration is gaining in importance. Additionally, digitization and the platform economy are severing the link between where people live and where they work.
Therefore, there is a need to discuss an additional European level of social security that is linked to and supports national systems. Cross-border employees, but also those who work de facto across borders across platforms, it could be uniformly secured in this way, to eliminate artificial competitive advantages due to different social contributions. Payments could be channeled through national systems. Compensation payments from European to national levels would ensure equal treatment of EU citizens working in the same place.
The EU can restore the link between protection and the workplace. Given the importance of the welfare state for the legitimacy of political systems, the sustainability of national protection systems must be preserved in the spirit of subsidiarity. However, the EU itself must be involved in safeguarding transnational work. The Conference on the Future of Europe could be the appropriate place to decide this.