Teleworking and the case for a new EU labour contract

That will entail a unified work contract suited to this increasingly mobile economy.

This would just be the logical reaction to circumstances the EU governments created with their reactions to the Covid-19 outbreak.

To limit its spread, governments asked companies and workers to avoid congregating in the workplace.

Widespread remote work proved feasible and productive. According to a Eurofound survey circulated in April, nearly four out of 10 EU workers started to work from home as a result of the outbreak.

Permanent remote work is not itself new, especially given tight labour markets in recent years.

It made a lot of sense for businesses to hire from a distance in the US when unemployment was at a record-low, effectively expanding the pool of available workers when it was too tight locally. The US has a distinct advantage in this area: Unlike the EU, it is one labour market.

But the pandemic is prompting many workers to wonder why they, too, cannot work on an ongoing basis from somewhere other than their office or a small apartment in the same city.

It was a popular topic of discussion in expat Facebook groups, especially in summer.

At the same time, companies are wondering what the new balance will be between working from home and sitting in the office.

Some businesses have come up with bold solutions: Twitter's CEO Jack Dorsey announced in May that employees can work from home forever.

A growing number of companies in the US are targeting their talent acquisition efforts toward different areas around that country under the assumption that remote work can be performed from anywhere.

Glassdoor, the job-posting site, says its remote job openings increased by 28 percent from a year ago, even while overall listings are declining.

But doing the same in Europe would involve greater complexity since companies would need to comply with several different labour and tax codes.

'Portability' problems

Individuals are free to move across the EU, but professional and economic barriers still exist for companies (different contracts) and workers (portability of welfare rights) to do so.

These issues are well-known, but reconciling labour codes has been hard to achieve because such market regulation sits at the core of the dialogue between social partners, making a potential "Brussels" intervention unpopular.

The wide spectrum of labour protection laws, from more noninterventionist to restrictive, does not help achieve this convergence.

As a result, only large companies can afford to hire across different European labour markets. Smaller companies still hire workers in other countries, but the transaction costs are prohibitive.

For workers, getting hired from a company in another country is not easy: often they must move or, when possible, work on a freelance basis, often a less attractive option.

This creates a competitive disadvantage for smaller EU companies, who don't have access to as large labour markets, and for workers, who are able to get fewer jobs.

Single contract

A unified EU contract would solve this problem.

The EU should not replace 27 national agreements, but should create a 28th one which serves as a second option in each EU country, especially for highly-mobile workers.

For each new job workers could be given the choice between the 'national' contract and the EU one.

The system could be constructed in such a way that moving permanently or for some months per year to another country would involve fewer legal hurdles compared to the spaghetti bowl of 27 different legislations.

The idea already circulated in 2013 but never gained traction. The pandemic makes it worth discussing again.

What are the potential costs? More research is needed to investigate how much this novelty can break existing equilibria.

Two issues might generate tensions, both related to the cross-country heterogeneity that exists in Europe in terms of wages and tax levels.

On the one hand, high-paid and high-productive workers in Nordic countries, for example, may be afraid to lose out to lower-cost countries in the east or in the south.

And on the other, high-tax countries might fear their workers moving more easily to where they can benefit from similar welfare provisions for a lower contribution.

It is not clear if a handful of mobile workers can really create competition between systems, but for the sake of creating a true EU labour market the idea is worth discussing again in these disruptive times.