Limits on posting workers create Europe’s high-cost cartels

Three Polish women picking strawberries in Germany
Many “posted” employees work in high-skilled jobs like IT service, but a new EU proposal could lead to rules that make their labor less competitive (source: dpa)

Markets work efficiently when they are based on competition. Cartels are damaging, and rightly are not allowed, because they eliminate competition. A successful internal market needs regional and regulatory competition, something that some countries – mostly those with excessive cost structures – frown upon. They use the terms “race to the bottom” and “unfair competition” to discriminate against less regulated or lower-cost regions.

At a meeting in Luxembourg on October 23, European Union labor ministers decided to put limits on “posting workers” – a system by which companies bring workers from one EU member state to another and remunerate them according to the laws in their country of origin. This is not to be confused with “wage dumping” and is perfectly in line with the EU’s principles of free exchange. Posting workers enhances competition and has mainly been used by companies based in Central Europe, such as Hungary, Slovakia and Poland.

French President Emmanuel Macron pushed hard for this change. He faces resistance from trade unions against his mild deregulation of labor laws in France. According to the agreement, wages and social security benefits should be paid according to the regulations of the country where the work is done. It is surprising that Mr. Macron, who claims to be a proponent of European values, has worked so hard to weaken liberal EU principles. Unsurprisingly, several Western European countries are following along for similar reasons, including Germany and the Benelux countries.

These countries complain that posting workers gives EU member states with lower labor costs an “unfair” competitive advantage, but they ignore that they are protecting a high-cost cartel. Imposing such rules is protectionist and limits competition.

Under the pretext of ‘fair’ competition, real competition is being limited

The ministers of labor reached a compromise that would introduce a cap of 12 months during which employers can “post” workers to another member state, with a transition period of four years. This change will be proposed to the European Commission and the European Parliament.

Astonishingly, President Macron posted a triumphant tweet on this subject, saying that Europe is “moving forward” and adding “more protections, less fraud.” This suggests that he considers a legitimate competitive labor market practice as “fraud.” It is disappointing that this comes from a politician who calls himself liberal.

In August of this year, President Macron embarked on a tour of Central and Southeastern Europe. It seems he had two interlinked agendas. The first was to divide the Visegrad Group by conspicuously only meeting in Vienna with the Czech and Slovakian prime ministers, purposely snubbing Hungary and Poland. The other was to lobby for the limits on posting workers. It has been reported that in exchange for Slovakia’s support, he suggested he would help the country reduce its refugee allocation.

This is a case where under the pretext of “fair” competition, real competition is being limited and protectionism is applied inside the internal market.

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