Social Competition in the EU: Myths and Realities

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The debate on social competition, or social dumping,
is as old as the European Union itself, yet it has been getting louder
in the recent years marked by economic turmoil and high levels of
unemployment in many of the member states. Public opinion and
politicians are worried that intense competition in the cost of labour
between the member states might result in the “race to the bottom” in
terms of social standards.
This
Study by K. Maslauskaite aims at providing a global analysis of the
various existing components of social competition in the EU in order to
see whether the differences between member states leave enough space for
engaging in a generalised “social dumping”. Due to the size
limitations, only the general trends on the national level have been
observed using the most relevant empirical data.

Overall, the analysis reveals some intriguing developments and shows that, generally speaking, there is little space for regime competition between the European “core” and the “new” member states.
For example, in terms of productivity-adjusted total labour cost, some
of the new member states have not only lost their status of the cheap
labour destination, but have also become more expensive than the
European core.

Unexpectedly, three member states not belonging to the Central and Easter European club, namely the
UK, Ireland and to some extent Luxembourg, seem to consistently
outperform all the other countries in terms of real labour costboth
in direct and indirect terms. In this sense, these countries could be
considered as the most realistic suspects of “social dumping”. It does
not automatically follow that these member states do engage in social
dumping though; it only implies that their economic model is the most
efficient in terms of labour cost. After all, as discussed in the Study,
disloyal and genuine welfare-enhancing competition might be sometimes difficult to disentangle, which makes the argument of “social dumping” difficult to prove.