TEN QUESTIONS ON ECONOMIC AND MONETARY UNION Dr Pauline Conroy Dublin, Ireland. Paper prepared for the ETUC Conference "Building the equality dimension to EMU and the IGC" Lisbon 17 and 18 February 1997 Fax: 353 1 6672540 Email: pauline@indigo.ie
Ten Questions on Economic and Monetary Union for Women Economic and monetary union is the next step following the completion of the European internal market. The completion of an internal market of goods and services has conferred different benefits on women and men in terms of employment. Women are still less economically active than men. The unemployment rate of women remains higher than that for men. The presence of children in a household continues to be associated with a drop in economic activity. The gap between the economic activity rates of women and men with lower levels of education continues to be extremely wide. 1 Economic and monetary union provides a new framework, inside of which social and economic. trends in employment, in social protection and in working conditions for women, may improve or disimprove. There are many interesting historical examples of attempts at partial or full creations of a single currency. There is the example of the Roman Empire which introduced a single currency, and the example of Emperor Charlemagne to do the same. In more recent times. Napoleon Ill convened a Commission on monetary Union in 1865 which attracted support from Belgium, Italy and the US. 2 However, none of these earlier examples raise the question of sex differences. Economic and monetary union has been proposed as an additional framework to promote economic growth, create stable conditions for investment and as a consequence of these improve the environment for employment creation in Europe. Monetary union is theoretically supposed to produce the kind of economic environment of stability and low interest rates which will be conducive to economic growth. In this model the environment for growth will attract investment and this in its turn will generate employment. An alternative model suggests that monetary union will initially experience a short-term crisis of confidence by investors. In this hypothesis, there will be a temporary rise in interest rates making it expensive to do business and generate jobs. In this latter scenario unemployment would rise temporarily. The creation of a single currency such as the Euro, the suppression of national notes and coinage and the question of a common economic and monetary policy are often treated as the same question. This is not strictly speaking true. These three can be treated as quite separate questions. Building convergence in economic and monetary policy is taking place now in 1 Eurostat, Luxembourg, 13.02.97. 2 'Rise and fall of monetary union,' Financial Times, London, 10.08.96. p.iii. 1
women and men inside social protection and more widely, inside welfare regimes? 2. The Inflation Question Can a gender perspective on inflation be developed? A central feature of the new monetary strategy is to keep rates of inflation under control so that economic growth may occur. There are two ways in which a gender perspective may impinge on inflation. The first concerns the complex methods used to measure inflation. Inflation can be measured in the prices of different classes of goods (consumer, capital, machinery) over time. These prices are recorded on an index. Expenditure patterns between women and men and household types vary considerably. Women spend more on food, children's goods and household goods. Poorer households spend higher proportions of their income on food and clothing. Given the importance of inflation in the convergence criteria for EMU more questions need to be asked in each country as to how inflation is being measured and the weight of various goods in the price indexes. The second gender dimension of inflation is the impact of inflation or inflation control measures on different household types. Low inflation provides a sense of security especially for households on fixed incomes or living on savings; a large proportion of whom are older women in retirement. An overemphasis or rigid insistence on stability will reduce employment growth. Since most employment growth in Europe has its origins in women's employment, such rigidity would have a stronger impact on women than on men. 3. The Care Question We are witnessing the passing of the male breadwinner society. The day when welfare systems and social security were based on the assumption that women and wives would be at home and only occasionally work in minor jobs of secondary importance qnd unequal value, is gradually giving way to awareness of the inbuilt discrimination of the social state against women. There is a risk that the value of improved earnings and living standards will be entirely absorbed by inter-generational transfers. lnter-generational transfers mean paying for the care of the elderly, such as nursing home care, medical care, additional housing costs (the previous generation) the costs of adequate child-care and after-school care (the next generation). The question of care is increasingly linked with working time. As more and more women enter the workforce and as more and more women work Saturdays or Sundays or at 5
night, their working time and travel-to-work time increases and the time available for care is reduced (see table 1 ). The Care question is not any longer reducible to one of child-care. The valuation of unpaid, part-paid or low-paid care work is one of the treatment of 'dependants' in society and the redistribution of care time and care resources. A range of options and approaches are emerging which vary from country to country and have different impacts on public expenditures: the privatisation of welfare functions the mixed economy of private - public - family welfare the shift to not-for-profit organisation of welfare While the reconciliation of working time and household time constitutes the main axes of debate in some countries, new approaches to service and welfare provision with significant importance for women have been promoted in others. Examples of the latter are the new and experimental (1996) guaranteed minimum income plan in Portugal and the new (1997) family and child-care reforms proposed in ltaly. 11 4. The Taxation Question The tax question and monetary union arises at several points of the discussion. lt arises from the potential pressure on governments to raise revenue while maintaining budgetary discipline. lt arises from unequal pay between women and men compounded or alleviated, depending on the country, by different tax regimes, more or less friendly to women or to second earners in a household. The tax question arises also because revenues are needed to maintain the standards of living in Europe including the necessary social transfers for an equitable society. The tax question arises from the disparate treatment of cross-border workers earning in one economy and being taxed in another. There is also an additional point at which the tax question arises. Alain Lipietz argues that a fiscal question is inextricably linked to the social question. 'The free movement of capital,' he argues, 'without harmonising taxation on the revenues of financial placements' has increased fiscal dumping in Europe 12 He proposes a uniform taxation of capital at source and a form of flexible approach to taxation rather than a flexible approach to social costs for employers and employees. Indeed there has been a recent report of a proposal for some form of tax harmonisation emanating from the European Commission. 13 11 see La Repubblica, 1997, 25.1.97. 12 A. Liepitz ( 1996) 'Social Europe: the post-maastricht challenge' Review of International Political Economy, 3 (3) pp 369-379. 13 'EU tax not ruled out' Irish Times, Dublin 17.01.97. part 2, p. 2.'Brussels confirms study of plans for unified tax,' Daily Telegraph, London, 17.01.97, p.9. 6
So what exactly is fiscal dumping? Fiscal dumping is the process by which one country deliberately alters its corporate tax regime to attract capital to locate within its tax borders and gain competitive advantage. Germany, for example, has accused Ireland of unfair advantage in attracting German banks to locate in Ireland at low tax rates thereby creating a tax haven (paradis fiscale). The personal tax treatment of women and men can have quite different outcomes for women and men depending on the tax unit used in their country. Whether the tax unit is the individual, the household, income splitting or a variation of these, each can produce different net results for women and men. The impact of such differences may be reduced or increased according to the tax allowances available in each national system. Is not now the opportunity to raise the question of taxation regimes and equality of opportunity? 5. The Employment Question The future of the public sector as a major employer of women is uncertain. This is all the more important since the sectors with the highest growth rate in employment between 1990 and 1994 are those with large or exclusively public sector components. In order of importance by the numbers of jobs created, recreational services are the fourth most important growth sector, the fifth most important is education and the sixth most important is health and personal services. The latter include social work, and employment in private households. lt is equal in size to real estate, business services, leasing, computing and research, and accounts for 8% of employment in Europe. 14 From the experience of integration into a single market, it would be unwise to assume that economic and monetary union will generate an increase in employment in the short-term. This was a promise of the internal market. Employment did increase in Europe, but the majority of new jobs took the form of part-time working in low valued sectors. Unemployment increased at the same time. So what would help? Job creation measures would help. A reduction in working hours might help. After 1999, a reform of the structural funds might help, especially in less advantaged regions in the form of solidarity transfers. 6. The Unemployment Question Will monetary union stimulate or be accompanied by more measures to enable women to integrate themselves into the labour market? Despite the frequent calls for an end to welfare passivity, expenditure on active labour market measures actually fell by the early 1990s with the exception of 14 European Commission (1995) Employment in Europe, Luxembourg, Table 49. 7
Germany. 15 In the UK expenditure on training per person unemployed halved between 1985 and 1992. The strongest predictor of the labour market status of women is their level of educational attainment. 16 Women and men with a third level qualification are very similar in terms of their rates of employment and unemployment. The presence of children in such households does not reduce their employment rates. The group of women for whom there is a big difference with other women and with men is that group containing women who have incomplete secondary education. Such women are more likely to be unemployed and more likely to be classed as inactive in surveys. For women in this group, care services and training may be very important in allowing them access to regular waged employment. Unemployment rates of women are considerably higher than those of men in all countries except Finland, Sweden and the UK. In some regions of Europe, of Spain and southern Italy, more than a third of women are unemployed - in Andalucia (Spain) almost 42%, in Extremadura (Spain) almost 45%. 1 Such high unemployment particularly affects young women. Thus any pressures on social protection, in particular in relation to unemployment functions will impact more strongly on women than on men. 7. The Pay Question Governments will have a reduced margin of manoeuvre in terms of the options available to meet the convergence criteria during this current stage 2 of monetary union and the maintenance of budgetary and deficit norms during stage 3 of EMU to commence in 1999. Among the items of public expenditure available for change is public sector pay. Is public sector pay an equality question? Yes, according to Jill Rubery of Manchester University. 18 She cites pressures on public sector pay in Denmark, France and Germany. In Italy, she mentions that public sector pay has fallen in real terms between 1992-94. A larger proportion of women's pay than men's pay is constituted by low pay. Since women are clustered around the lower levels of the public sector pay grades and bands, pressures on pay have a disproportionate impact on women. The implications for gender pay equality of changes in public sector pay are not sufficiently analysed, she argues. The methods by which pay is negotiated - be it through centralised or decentralised collective bargaining have different outcomes for women and men. Women appear to fare better under more centralised systems. In the same mode wage restraint (to reduce inflation, for example) interacts with pre-existing unequal pay and grade systems and may exacerbate inequality. 15 European Commission (1994) Employment in Europe, Luxembourg, p. 156. 16 see OECD (1995) Education at a Glance- Indicators, Paris, chapter 11 17 Eurostat (1996) Statistiques en Bref, Regions, no 2, p.l. also Regions, no l.p;1 18 J. Rubery (1996) Mainstreaming gender into employment policy. Paper of the University of Manchester Institute of Science and Technology, UK. 8
APPENDIX! SOME TERMS IN USE IN THE DISCUSSION ON ECONOMIC AND MONETARY UNION EMU: EURO: EM I: ECB: ERM2: Economic and Monetary Union New currency to replace national currencies of participating countries and the existing ECU - European Currency Unit. 1 Euro will be valued as ECU 1. European Monetary Institute which co-ordinates member state monetary strategies, prepares for a common currency to be managed by a future European central bank. The EMI will be liquidated when member states move into Economic and Monetary Union. European Central Bank which will conduct monetary policy from 1999. The General Council of the European Central Bank will be its governing instance. A new exchange rate mechanism in which will participate the euro-area Member States and the Ministers and Governors of Central Banks of non-euro States joining the ERM. STABILITY PROGRAMMES: Each Member State adopting the Euro will be required to adopt a stability programme with budgetary objectives and assumptions about economic development. The stability programmes are intended to be made public. CONVERGENCE CRITERIA: A set of economic conditions, including debt management, laid down in the Maastricht Treaty, to which Member States will adhere if they wish to join Economic and Monetary Union. Among the criteria is that which stipulates that government deficits shall not exceed 3% of GDP- Gross Domestic Product. EXCESSIVE DEFICIT PROCEDURE: Sanctions to be imposed on member states which exceed the 3% deficit ratio. The sanctions will take the form of fines. EXCESS DEBT: A convergence criteria which stipulates that the ratio of government debt to GDP should not exceed 60%. RECESSION: A period of economic development during which the growth in demand for goods and services, in personal spending and in real incomes, is very low or static. Source: extracted from Dublin Council Conclusions December 1996 and EMU, Europa server. European Commission. 11
TABLE 1 WORKING TIME IN THE EUROPEAN UNION 1995 Men Women Total* Numbers % % % Work nights usually 7 3.5 5.5 6+ million Work nights sometimes 12 5.0 9.0 10 million Work Saturdays 22 24 23 26 million Work Sundays 9 8 10-12 million usually Work Sundays 17 12 14.5 17+million occasionally Source: extracted from Employment In Europe, European Commission, 1995, chapter 6 data for employees 12