April 12, 2018
The ineffective European Globalisation Adjustment Fund
Grégory Claeys and André Sapir have an interesting analysis of one of those programmes that the EU introduced to much fanfare but which ended up not being really effective: the European Globalisation Adjustment Fund (EGF). The conclusion one draws from their article is that the fund is macroeconomically irrelevant, inequitable, and designed to maximise its political visibility. Moreover, there isn't sufficient data to even answer the question whether EGF assistance makes workers more likely to find another job.
First, there are good reason why the EGF is a sensible fund to have. Trade is an exclusive competence of the EU, but opening sectors to international trade has a potential for loss of employment, which it is a national competence to address. Therefore the logic suggests that the EU would recognise its political responsibility for assisting workers affected by its trade policy, and thus co-finance social assistance to them. However, the size of the programme is so small to be ridiculous or offensive: 0.1% of the EU budget which itself is 1% of EU GDP. We're talking about a one-hundred-thousandth of EU GDP. Mindful that its actual economic impact would be accordingly small, the EU decided that the fund should be targeted to be both economically sensible and politically visible.
The EGF has a high threshold for the companies that can call on the fund, as at least 500 workers - originally 1000 - need to be affected. This means that smaller firms are excluded unless they are geographically concentrated, which raises issues of equity. The EGF ends up helping employees of large firms whose cases are visible in the media. Claeys and Sapir propose that the programme should lower its threshold, which would require its size to be increased by an order of magnitude. The scope of the programme should also be expanded from globalisation to other policy-induced losses of employment. And finally, better data needs to be available, to be able to evaluate whether the EGF is actually effective in meeting its goals. It's a bit shocking to read that data is not being collected on an individual basis, but only on the case by case level.
For these kinds of EU programmes (the Youth Guarantee is another example) to actually have a macroeconomic effect they should not only be at least 100 times larger, but also not be funded ultimately by member states' budgets (which is what the EU budget is). But, as we note in our parallel story, even Macron's modest ambitions in this direction are likely to be frustrated.