In the East, many EU work rules don't apply
By Thomas Fuller International Herald Tribune
WEDNESDAY, JUNE 15, 2005
WARSAW The European Union has many pages of laws on working conditions
and working time, but none of those rules apply to people like Monika Murawska,
a 36-year-old English teacher who has taught at the same private school here
for more than a decade.
Or to Krystyna Roslan, a 54-year-old mother of two who has worked as a
proofreader for a men's magazine for five years.
Murawska and Roslan are among an estimated half million people in Poland
who work in an office and have a boss but who are, technically, independent
contractors. They are not eligible for vacations, sick days, overtime or
maternity leave.
Researchers say this type of working arrangement is one of the innovative
ways used by companies in the former Communist countries that joined the
European Union last year to skirt EU and local workplace rules.
"They implemented on paper all the EU regulations," said Daniel
Vaughan-Whitehead, a specialist on Eastern Europe at the International Labor
Organization in Geneva. "But when we look at the reality on the company level,
we see a gap."
At a time when the European Union is divided politically over its
proposed constitution, there is a widening rift between the freewheeling and
free-market Eastern European countries and Western European states where social
benefits have become a way of life.
Countries like Poland, Slovakia and Estonia continue to evolve toward
American-style economic systems of low taxes, low trade union membership and
low social benefits.
Leading politicians in Poland, by far the largest new member of the EU,
are proposing the introduction of a single rate for income, sales and corporate
taxes, similar to what Slovakia has done. The rate has not been decided yet but
it could be as low as 19 percent.
Janusz Grzyb, a deputy director in the European affairs department of the
Polish Ministry of Economic Affairs and Labor, speaks derisively about the
"social models" of Western Europe.
"Europe needs more flexibility in its labor market," Grzyb said in an
interview. "Our mentality is survival."
And survival means working harder than Western Europeans.
Workers in the 10 countries that joined the EU in May 2004 work on
average almost three weeks more per year than workers in Western Europe,
according to study released last month by the European Industrial Relations
Observatory, a research body financed by the European Commission.
Before last year's expansion of the EU, bureaucrats in Brussels sought to
mold the Eastern European candidates in a Western European model, with trade
unions and employers associations engaged in "social dialogue."
Yet while unions were useful in bringing down Communism in Poland, today
they are close to irrelevant, shedding members to the point where the
percentage of unionized workers is generally closer to the 12 percent level in
the United States than the 30 percent average in Western Europe.
Perhaps the most striking divergence between East and West in the EU
today is the use of innovative working arrangements. In Poland, the number of
employees who are technically independent contractors appears to have remained
steady in recent years. But in other countries in the region, the use of this
type of contract has increased sharply. For instance, in Estonia in the past
four years, the number of self-employed people in the service sector has
increased 62 percent, according to Eurostat; in Slovakia, the recorded rise is
40 percent.
Self-employed people can surpass the EU's weekly working limit of 48
hours because the labor code does not apply to them. (The EU's so-called
working time directive, which dates to 1993 and is undergoing revision, also
does not apply to managers and a few other categories of workers.)
St�phane Portet, a visiting researcher at the University of Warsaw who
has studied the self-employment trend, says surveys of companies suggest that
500,000 people work this way in Poland, a country of 38 million people, but
that the number could be much higher.
Companies like the system, he said, because it provides them with the
ultimate power over whether and when they want to hire and fire.
"The question of decent work or the quality of employment is not
important in a country where 37 percent of those under 25 do not have a job,"
Portet said.
For Western Europeans, the easterners' creative ways of skirting EU law
amount to "social dumping," a term used by trade unions and politicians in the
West that implies the erosion of social benefits and labor codes through
external competition.
"They are supposed to implement the same regulations, but if they
circumvent them they gain competitiveness," said Vaughan-Whitehead, who
recently published a report, financed by the European Commission and
International Labor Organization, titled "Working and Employment conditions in
the New EU Member States: Convergence or Diversity?"
Vaughan-Whitehead cites a survey of Hungarian employers in which 46
percent said they paid part of their wages to employees under the table to
avoid taxes and social charges. "If this becomes a long-term problem it will
create tensions within the EU," he said. "There could really be a race to the
bottom."
The new EU members are hardly the only countries where companies seek
ways around labor restrictions. Spanish firms use temporary work contracts to
maintain flexibility, and Italy has a massive market for undeclared work.
The main difference appears to be that Eastern European countries are
working harder and longer to bridge their income gap with the West.
Portet says that the legality of substituting independent contractors for
regular employees in a country like Poland is questionable, but that the
practice is rarely challenged in the courts because it benefits both the
employer and the workers, who pay a lower tax rate.
Murawska, the English teacher, would rather be self-employed. "I like the
independence," she said. She is paid the equivalent of ?10 an hour, cash, and
left to figure out mandatory medical insurance, retirement savings and the
like.
Roslan, the proofreader, says the system works well for her because she
is eligible for a state pension from a previous job, but she worries about
others.
The self-employment system favors the aggressive and outgoing, she said.
"I have a wider perspective because I have children," she said. "If young
people don't have an entrepreneurial streak they find it every difficult to
find a job."
She added: "Not everyone is an entrepreneur."
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