Macron is right: Posting of workers in Europe needs better regulation

The posting of Eastern European workers was a major issue in the French electoral campaign. The French are afraid that cheap competition will put them out of their jobs. Posted workers are employed in their home country on local terms and then sent to another European Union country for a period of weeks or months to provide a service. Two million Eastern European workers spend months and years of their lives in Western European companies working as butchers or caregivers, usually for Eastern European wages. Emmanuel Macron is now demanding that Eastern European companies should no longer benefit from the cost advantages of low social contributions, and that posting must be reduced from a maximum of two years to one. Eastern European governments however, in particular Poland and Hungary, insist on the right of their companies to offer their services.

Germany is keeping well out of this East-West conflict, even though it is the largest destination country in the EU for posted workers. The German government has so far contributed little to improving their working conditions, neither at a European level nor in Germany. In 2014, the EU Commission adopted the so-called enforcement directive, which was a reaction to the worst cases of abuse and organised crime. Germany saw no need to alter its laws in order to implement the new directive, neither regarding the intensity of cooperation between the relevant authorities nor the need for improved assistance for the posted workers.

After meat industry scandals in 2013 and 2014 revealed poor and sometimes illegal treatment of workers, a minimum wage was agreed upon between industry and the food worker union. But that is often undermined by companies’ use of creative accounting practices. Germany profits from the lowest prices offered by the companies sending workers, and tends to turn a blind eye to working conditions once the workers have arrived. 

This attitude is patently wrong, as our research has shown (Hassel, Anke, Jette Steen Knudsen and Bettina Wagner. 2016. Winning the Battle or Losing the War: The Impact of European Integration on Labour Market Institutions in Germany and Denmark. Journal of European Public Policy).  It creates destructive price competition, in which domestic companies cannot survive and which rewards those companies that are particularly unscrupulous in dealing with their employees, rather than paying attention to the quality of cross-border services. Contrary to the spirit of the European common market and the freedom to provide services, many firms are established in Eastern Europe solely for the purpose of posting. Instead of providing temporary services in Western Europe, their services are provided by means of permanent subcontractor chains and wage dumping. Their business model is not the provision of a service, but they are personnel providers in areas where cost pressure is high and there is a bottleneck in personnel. The result of this is billing fraud and exploitation.

The reforms demanded by Macron, for shorter periods of posting and the harmonisation of social insurance contributions, are useful and long overdue. They should be supplemented by a comprehensive liability regime for contractors and better controls. Europe needs to be competitive in quality rather than in wage dumping. The new German government should pay attention to President Macron and address the issue. 

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Find their research here:

Wagner, Bettina and Anke Hassel. 2016. Posting, subcontracting and low-wage employment in the German meat industry. In: Transfer Special Issue on "Labour mobility in the EU: between economic freedom and labour standards" No. 2/2016.

Hassel, Anke, Jette Steen Knudsen and Bettina Wagner. 2016. Winning the Battle or Losing the War: The Impact of European Integration on Labour Market Institutions in Germany and Denmark. Journal of European Public Policy.