Labour Market Challenges and The Role of EU Institutions

(Robert Keele, University of Cambridge)

The 2000 Lisbon Agenda, supported by subsequent OECD growth reports and Commission studies, aimed to increase the competitiveness and overall health of EU economies partly through European labour market reform. The Commission and many other EU officials, citing influential economists like Harvard’s Alberto Alesina, maintain that reaching Lisbon's lofty goals is only possible through neo-liberal structural reforms of member states' labour markets. Critics, including prominent economist Robert Solow and Cambridge economist Mia Panic, argue that the proposed reforms rely too much on comparisons with the United States and Britain, and that neo-liberal reforms are an unnecessary nostrum. This article addresses the arguments of both sides of the debate to find areas of large consensus for reform, beginning with the accepted premise that the current level of EU unemployment is unacceptable and that coming demographic shifts will shortly make many member states’ current welfare policies unsustainable. A survey of the relevant literature reveals that there is great consensus for product market reform and for some labour market reforms. The article then asks what role (if any) EU institutions should play in implementing these reforms, concluding that product market reforms at least are best implemented at the EU level.