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This post focuses on social justice in the realm of work, more specifically on access to jobs and livelihoods. Daniela Caruso, in proposing in 2013 a retrospective analysis of social justice scholarly projects in European “private law” and/or “contract law,” rightly criticized the tendency of those projects to focus almost exclusively on consumer protection and weaker parties in commercial transactions. Caruso argued that this focus was particularly misguided in the wake of the economic crises of the 2010s; the European social-justice private law project should now pay attention to “contracts that secure housing, employment and access to credit” instead of focusing so much on contracts over “on-line shopping.”

Caruso was right to insist that the economic crises that befell the countries of what we might call the European “periphery,” both inside and outside the eurozone, make it particularly untenable to exclude “contracts that secure employment” from European social-justice private law projects. The crises, after all, led to unbelievably violent spikes in unemployment in the periphery. For example, unemployment in Greece and Spain respectively went up from 8.4% and 8.3% in 2007 to jaw-dropping peaks of 28.1% and 26.4% in 2013 and was only down to 9.9% and 11.5% in July 2024. Similarly, Lithuania, Latvia, and Croatia, to give just a few examples of peripheral countries then outside the eurozone, saw their respective national unemployment rates shoot up from 4.3%, 4.6%, and 8.5% in 2007 to peaks of 17.8%, 19.5%, and 17.3% between 2010 and 2013, then taking some 10 years to come back down to anything close to their pre-crisis levels. This kind of unemployment leaves lasting effects long after it disappears; those affected see their living standards, long-term job prospects, and indeed physical and mental health suffer.

The causes of the crises were everywhere quite similar. Against a backdrop of enormous transborder bank lending and aggressive competitiveness-increasing policies from countries of the core, there was a buildup of public and/or private debt in the periphery that boosted employment and demand, resulting in current account deficits. An exogenous economic shock (the ripple effects of the 2007 American financial crisis) sparked “runs” whereby investors massively sold the bonds or currencies of the indebted peripheral states and bought the bonds or currencies of the less-indebted core states. This led to gigantic interest rate spikes on the bonds and pressure on the exchange rates of peripheral states that made their public debts explode and triggered the crises.

While the factors described in the previous paragraph made peripheral countries vulnerable to crisis, the mass unemployment we have seen was ultimately caused by the colossal contractionary reductions in public spending mandated by the European Central Bank (ECB) and the rest of the EU institutions. Those institutions imposed austerity as a condition for access to funds badly needed to stave off investor runs on national financial assets which threatened to bring down entire economies. In light of the judicially-created rule that austerity must accompany any central bank or fiscal assistance in order for such assistance to be legal, we can expect mandated austerity to return as soon as a new substantial economic boom causes a buildup of public and/or private debt in the periphery. It thus makes sense to prepare now for the reappearance of mass unemployment in Europe.

When one sets out to follow Daniela Caruso’s call to incorporate work law into existing social-justice private law projects to heed the lessons of the European economic crises of the past 15 years, one is inevitably confronted with the reality that work law has not developed doctrines or instruments to ensure enough jobs are available to people who want to work. Work law overwhelmingly has focused and still focuses on the working conditions and wages that are offered by employers, not on whether jobs are offered. This lacuna has contributed to the seeming irrelevance of work law itself in the face of mass unemployment during recent economic crises. Judging by established literatures and policy discourse, it seems that the only tools available to deal with mass unemployment are broad stimulative monetary policy (which countries in the eurozone or wishing to join it have renounced) and broad stimulative fiscal policy (by hypothesis available to a limited extent in crisis times).

Based on a pair of ongoing writing projects, I want to briefly present two regulatory tools that could better incorporate the objective of creating and protecting jobs within work law, and by extension within a broader agenda for social justice in European private law. These tools are (1) the prohibition of certain mass layoffs or collective redundancies based on their impact on profits and (2) job guarantee programs, i.e. unlimited and direct provision by the state of relatively low-paid and public-good-oriented employment.

I. The Prohibition of Mass Layoffs that Increase Profits

My first proposed policy is to prohibit mass layoffs or collective redundancies (i.e. the termination of more than one worker for economic reasons) when they aim to or can reasonably be expected to increase profits. Mass layoffs are almost never prohibited, based on their impact on profits or otherwise. The more usual regulatory limit to layoffs in Europe is one whereby states impose on firms an obligation to mitigate layoffs or relocate employees where possible (and almost all non-European countries do not prohibit layoffs at all). A notable exception to this tendency is France, which imposes a ban on mass layoffs that aim to “improve” rather than “preserve” profitability.

Intensely criticized by French neoliberal economists, this unique rule within European labor/employment law could, if used right, counter output reductions imposed by big business to capture monopoly profits at the expense of workers and consumers.  The easiest scenario in which to intuit how this result can come about is one where a firm has monopolistic or oligopolistic power. That firm can lower output and labor quantity (i.e., employment), which should raise the price of the product sold. Even assuming the output reduction does not lower wages, the appropriation by investors or managers of consumer surplus comes at the expense of some workers – those who lose their jobs. In other words, monopsonies do not need to lower wages to hurt workers; it is enough that they lower output and employment.

The French prohibition on mass layoffs that improve profitability is well designed to distinguish between instances where a firm faces lower product demand and has no choice but to downsize (to preserve profitability) and instances where a firm faces unchanged product demand and is trying to use its market power to extract consumer surplus (thereby improving profitability) at the expense of workers. Note that this beneficial contribution of the legal rule is present outside of crisis times and would even exist in a state of low unemployment. I now turn to crisis times to further explore the contribution of a regulatory prohibition of mass layoffs that increase profits.

In crisis times, many more firms genuinely face lower product demand than in normal times. But firms may also exploit the crisis to get away with output reductions and price increases they could not otherwise achieve and which are not necessary to face the crisis, making the prohibition on mass layoffs that increase profitability entirely relevant. Moreover, it may be less important in crisis than in normal times to distinguish neatly between output reductions which are justified by lower demand and output reductions which are not. Indeed, output reductions justified by lower product demand might themselves lessen product demand even more at an aggregate level, furthering a self-reinforcing recessionary cycle. Regulatory “overreach” which would prohibit layoffs that attempt to merely preserve profitability in the face of economic downturns might thus be economically desirable and help preserve jobs during crises (Keynes famously made an analogous point regarding wage increases).

One pivotal judgment by the European Court of Justice (ECJ) may strike EU law aficionados as relevant to this discussion. In AGET-Iraklis, the ECJ struck down a Greek law that allowed a minister to prohibit mass layoffs when he or she deems it justified based on considerations including “conditions in the labour market, the situation of the undertaking and the interests of the national economy.” The ECJ held that, because the law gives the state a veto right over a “fundamental decision in the life of an undertaking” and uses “criteria formulated in general terms, without any indication of the specific objective circumstances in which those powers are to be exercised,” it unjustifiably interferes with the freedom to conduct a business. Any attempt to use prohibitions on mass layoffs that improve rather than preserve profitability would have to account for the possibility that such a policy be struck down by the European Court of Justice, a point I revisit in the conclusion below.

II. The Job Guarantee

My second proposal, the job guarantee, consists in the government provision of unlimited basic, relatively low-paid, and public-good-oriented jobs to all those willing to do those jobs. The job guarantee proposal has gained heightened visibility in European policy circles after it was advocated for in a November 2023 EU Parliament resolution on job creation for the green transition and in a June 2023 thematic report by the UN Special Rapporteur on extreme poverty and human rights.

The job guarantee was first analyzed in depth by American economists who drew inspiration from New Deal programs and policies advocated for by civil rights leaders like Martin Luther King, Jr. Public goods like care work, community centers, and environmental upgrading or restoration are all proposed as possible job guarantee output.

On the input or aggregate-demand side of the policy, the job guarantee aims to eliminate (much) unemployment by providing an unlimited number of jobs at a relatively low wage to all those who want to work. The job guarantee entails creating jobs targeted at the bottom of the wage and skill ladder – albeit with a view to providing new skills and training on the job. This targeted nature of the job guarantee has long been said to make it a more effective job-creation tool than indiscriminate fiscal or monetary stimulus, because it lacks the inflationary and unstable potential of the latter. On the face of it, this makes the job guarantee a promising avenue for crisis-time stimulus, if a state can afford it.

The wage that is chosen – along with the number of hours offered – is a key determinant of both the cost and the distributive effect of the program. Not only are higher wages by definition more costly, but the job guarantee wage becomes the effective minimum wage in the economy; no one will work in the private sector below what they can earn in the job guarantee state sector. A job-guarantee minimum wage increase will likely cause some unemployment if it is higher than the wage that would otherwise be paid in the private sector. This unemployment is a loss to the economy and a fiscal cost for the state that must give a job to those deprived of work by the minimum wage. All these costs are at least partly offset by job creation in the private sector due to the aggregate demand created by giving jobs to those who would otherwise have been unemployed, as well as savings in public spending on unemployment and poverty reduction programs. There are also benefits to society in the form of less skill attrition and social dislocation or crime that unemployment usually brings about.

The wage chosen is also the main determinant of the distributive effects of the job guarantee. A low wage would not do much to reverse the effects of mass unemployment because it would make workers fall from their private sector job to a low-wage public sector job. In fact, anyone earning significantly more than the minimum wage is likely to choose to remain unemployed in a recession rather than work in a job guarantee program. A low-wage job guarantee might therefore not even reduce unemployment (nor stimulate aggregate demand) all that much.

A study from 2018 found that a federal American job guarantee with a 15$/hour wage operating with a mix of part-time and full-time workers would cost 2.5% of GDP. Another study by Eric Tymoigne extrapolated from data gathered from 1930s New Deal public works programs to find that a job guarantee program that offered living wages would cost around 20% of GDP in an economy where unemployment is at 20% or more. Tymoigne finds that once unemployment is under control and recedes to between 6 and 9%, the cost of the job guarantee goes down to between 2 and 4% of GDP. The lesson is quite clear even if these numbers might be valid for other countries only as rough orders of magnitude: a job guarantee becomes very expensive in depressed economies, assuming a living wage as Tymoigne does.

This latter proviso is key; states are likely always able to “afford” a job guarantee at low wages even if they have a fixed exchange rate or common currency. But even that is conceding too much, as affordability is eminently institutionally contingent both during and outside of crises. For instance, Greece was granted over 100% of its GDP in bailout money over the 2010s crisis period; surely some fraction of that could have been used to eliminate unemployment at the bottom of the wage ladder and ensure living wages for all as a means of boosting aggregate demand. Moreover, the public debt of the crisis countries itself was due in large part to investor runs on government bonds and/or national currencies; the ECB could therefore have acted earlier to prevent the build-up of government debt (and the resulting unemployment), thereby saving member states from ending up in a situation in which a job guarantee is only affordable at very low wages. In this account, then, the EU institutions are to blame for a member state’s inability to protect jobs during a crisis.

Conclusion

My two proposals can be seen to chip away at the monopoly which capital (i.e., investors and managers) has over investment and employment. Indeed, the prohibition of profit-increasing layoffs limits capital’s power to that of reducing employment only when it is necessary to deal with changed market conditions. As for the job guarantee, it takes away investment and employment decisions from capital entirely as to low-wage workers, leaving capital power over only higher-wage workers.

Note, though, that I have ended my presentation of each of my two proposed policy tools with an account of potential obstacles EU institutions could pose. One might conclude that the EU (and/or the eurozone) is itself an insurmountable obstacle to the reining in of capital’s monopoly over investment and employment, such that exiting the EU or eurozone is the way to go. I am not opposed in principle to exit, but I now want to quickly evoke pathways for resistance and defiance that might allow for the implementation of my two proposed policies within the EU and/or eurozone.

Member states could try to minimize the likelihood that the ECJ would strike down a prohibition on layoffs that increase profits. One way to achieve this would be to make the prohibition applicable only to national firms, so as to exploit the ECJ’s heightened scrutiny of laws that target foreign firms exercising their free movement treaty rights. Another strategy, assuming a judgment striking down the layoff prohibition is issued, would be to use “signaling” strategically to avoid non-compliance procedures from being initiated. Finally, a state might activate the layoff prohibition only during crisis times and accept any fine for non-compliance with an ECJ judgment as an acceptable price to pay for safeguarding jobs.

As for the job guarantee, scholars have written at length about how it could be financed by a eurozone or fixed-exchange-rate country undergoing a crisis. One possible strategy is to pay for the job guarantee in a complementary currency that will be used locally alongside the euro but will not increase the euro-denominated debt. Another strategy is to pair the job guarantee with fiscal contraction and/or import restrictions to limit the impact of the program on the national debt. Finally, another possible strategy is to use the job guarantee early in the crisis, when the program is still cheap, to put a floor on unemployment and aggregate demand that might prevent the crisis altogether.

There would be a lot more to say about policies member states might deploy to rein in capital’s decisional power over investment and employment in Europe. Nevertheless, I hope the above suffices to establish my two proposals as worth exploring and strategizing around, as reforms that might potentially become “non-reformist” and catalyze significant change in the direction of social justice.

Art by Tomoko Nagao
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