Innovation Through the European Social Fund: Investing in Reintegration Policies in The

Innovation through the European Social Fund: Investing in reintegration policies in the Netherlands and Spain

Minna van Gerven*, Susanna Gürocak**, Bart Vanhercke**

*University of Twente, Institute for Innovation and Governance Studies, School of Management and Governance, Postbus 217, 7500AE Enschede, The Netherlands, tel. 0031534893222. E-mail:

** European Social Observatory, 13, Rue P.E. Janson, 1050 Brussels, Belgium tel. +3225392808. Email:

Paper to ESPAnet: Stream 1 - Social innovation and social investment (chaired by Stephen Sinclair and Simone Baglioni)

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Abstract:

Research on the Europeanisation of social policies has described the European Union as a source of innovation through which new policy instruments have been diffused to the Member States(Heidenreich and Zeitlin, eds., 2009, Mosher and Trubek, 2003). Among other things, the shift from passive to active social and labour market policies is understood to have occurred within the EU framework of European Employment Strategy as the Social Open method of coordination(Heidenreich and Zeitlin, eds., 2009, Kvist and Saari, eds., 2007, López-Santana, 2006).What is often omitted, is that many of these innovations at the domestic level have been implemented with financial help of the European Social Fund (ESF).Building on a prudently emerging literature, this paper aims at unravelling how this EU financial instrument impacts on policy innovations at the domestic level. Verschraegen, Vanhercke & Verpoorten (2011) have already disclosed a set of Europeanisation effects and their mechanisms in their analysis of the usage of ESF in the different Belgian Regions. This paper will test the appropriateness of this framework in two other Member States, namely the Netherlands and Spain. The empirical data for such a comparative case study consist of semi-structured expert interviews in these countries as well as documentary analysis. Our preliminary findings indicate that similar Europeanisation effects can be distinguished in the Netherlands and Spain and, but that the extent to which the ESF is being used as an innovative tool, and the conditions under which effects rise, varies significantly across countries, and over time.

1. Introduction

After more than a decade of extensive scholarly discussion of Europeanisation of social policies, scholars suggesting the favourable impact of the European Employment Strategy (EES) in catalysing domestic change(Ballester, 2005, Börzel, 1999, 2002, Featherstone, 2003, Guillén and Álvarez, 2004, Mailand, 2008), are gaining the upper hand against the opponents of EES’s(effectiveness)(Citti and Rhodes, 2007). The most cited example of such catalyst effect is the shift from passive to active measures against dealing with unemployment, that is commonly understood to have taken placein the MS under the EU coordinated policies(Heidenreich and Zeitlin, eds., 2009, Kvist and Saari, eds., 2007, López-Santana, 2006).Although it may thus seem now that the announcementsof the early death of EES procedural instruments were largely exaggerated(Citti and Rhodes, 2007, Idema and Kelemen, 2006), the empirical evidence of Europeanisation, or its effectiveness, in the field of social policies is still far from being convincing. Analytically establishing a direct link between European social policy soft laws and domestic reform, through the cognitive processes of learning as advocated in most studies on Europeanisation of social policies, provides us with mixed evidence as far as causality is concerned. Although it may be reasonable to suggest that national social policy-making no longer takes place in splendid isolation in the semi-sovereign welfare states in a globalised world(Ferrera, Hemerijck and Rhodes, 2001, see also Stiller and van Gerven, 2012), domestic social policies are nevertheless still considered as a product of domestic policies and necessitated by internal and/or external pressures. In this article, we undertake another approach to evaluate the Europeanisation of domestic policies and its effectiveness. Namely, we suggest analysing the domestic use of the European Social Fund (ESF) in order to detect EU induced changes on reintegration policies in the selected countries. While the initiation of the EES may have emphasised the paradigmatic shift from passive to active labour market measures as argued above, it is often the ESF that constitutes the main financial tool to achieve these EES objectives, since eligibility requirements to receive ESFfunding are directly linked to the EES targets (European Parliament and Council of the European Union, 1999, Verschraegen, Vanhercke and Verpoorten, 2011).Hence, disclosing domesticusage of the Fund enables us to analyse the impact of EU driven targets on domestic employment policies.

Surprisingly, more than ten years after the launch of the EES, very little attention is given to theESF as a tool of European innovation to alter domestic policies. Most literature focusing on European money, tries to link multi-level governance theories to Structural Funds. This stream of literature pays much attention to the empowerment of lower levels of government through the funds(Bache, 2007, Hooghe and Marks, 2001), however, it does little to analyse the Europeanising impact on the different levels of governance through the ESF.In fact, literature describes the ESFas being “less an instrument of social and employment policy than a side payment to induce poorer Member States to accept deep economic integration” (Majone, 2005, p. 190, similar arguments also put forward by Brine, J., 2004). Indeed, if available, literature on ESF has focused on its macro-economic effects ase.g. employment, growth, and regional welfare(Ederveen, Gorter, de Mooij and Nahuis, 2003). These macro-economic models, however,inaccurately perceive the Europeanising ESF effects regarding its impactson the micro-economic level(Cappelen, Castellaci, Fagerberg and Verspagen, 2003). It is the use of ESF to innovate reintegration policies, that we intend to analyse in this article. Following the insights in a recent publication by Verschraegen et al. (2011), we analyse the ESF as “part and parcel of the EU employment governance toolkit” (p. 56), by assessing the domestic effects of the ESF. Thus, for analysing the Europeanisation of reintegration policies the following research question will guide the investigation in this paper:to what extend and under what conditions is innovation of reintegration policies through the ESF taking place in the Netherlands and Spain from 1994 to 2009.

1. Theory

The ESF allegedly constitutes a tool that domestic actors appropriate to innovate integration policies, whilethe impact of ESF may vary betweendriving innovation in policy instruments, governance structures or cognitive frames(López-Santana, 2009, Verschraegen et al., 2011).

Foremost, through leverage effect,ESF is seen to drive innovation and enable (local) actors to learn about the problems and solutions in reintegrating people back to work.Verschraegen et al. (2011) have distinguished two mechanisms behind these effects. One mechanism is the strategic usage, where actors have appropriated the ESF instrument to further their own political agendas. A second mechanism is learning, where actors have simply learned how to use the ESF as well as learned together through increased collaboration between regions.

Next to leverage effect, Verschraegen et al.(2011) finds evidence for effects on the governance of employment policies. Europeanisation through ESF is suggested to cause changes in institutional configurations or in the field of actors involved in the preparation and implementation of these policies.They explain these to happen through the mechanism of aid conditionality of this instrument. ESF money needs to be redistributed according to ESF priorities, also in line with the ESS priorities. It should also be redistributed to the local and regional levels to be used in a way that is in accordance with the ESF priorities. At the same time, aid conditionality necessitates sound financial management, since the money distributed must be spent correctly.It is crucial to bear in mind that these effects can be partly intertwined and thus cannot be completely disentangled from each other. This applies likewise to theunderlying mechanisms.

To find out to what extent Europeanisation through innovation of reintegration policies has occurred in our selected cases, we argue that it is worth of analysing the domestic use of ESF and evaluating the Europeanisation of domestic policies through the analytical lenses of Europeanisation effects and mechanisms provided by Verschraegen et al. above.The analyses of effects and mechanisms are argued(Elster, 2007, Mayntz, 2004) to produce deeper causal knowledge of social processes and their interrelations, and accordingly, allow us to contribute to the Europeanisation discussion. We acknowledge, however, the inability to draw direct causal linkages between ESF and domestic reforms as research on Europeanisation by case selection is affected by no-variance problems(Haverland, 2006).

It would be naïve to expect that domestic change is driven by Europeanisation only, rather domestic issues as e.g.changes in political powers or economic restrains such as suddenly rising social expenditure and/oradministrative inefficiency often play the first violin necessitating policymakers to change the status quo. In order to find out under which conditions Europeanisation takes place, we formulate some hypothesis on Europeanisation effects in interaction with domestic pressures. Previous literature has convincingly shown that policymaker’s perceived political or institutional misfit commonly precedes policy changes(Cowles, Caporaso and Risse, 2001, Börzel, 1999). The institutional misfit may occur in relation to domestic pressures (i.e. ever increasing unemployment constituting anindicator of institutional failure) or European ones (i.e. incompliance to EU guidelines). Theidentified misfit, however, constitutes a necessary but insufficient condition for adapting domestic policies, as facilitating factors to close this perceived gap between current and preferable policies must be prevalent to induce change. Hence, adaptations of domestic policies can only take place if certain ‘tools’ to alleviate this change are on hand (Börzel and Risse, 2003). In the context of Europeanisation, Verschraegen et al. (2011) suggest that even in times of political stalemate and economic austerity, ESF can serve, through its leverage effect, as a remedy to political non-action through funding and evoke innovative initiatives by offering (co)financing for new policies. Accordingly we hypothesise that

H1:Domestic change -catalysed by Europeanisation - will be more likely to happen in a country where institutional misfit is perceived to be larger than in a country where itis lower.

Governance of social problems is also a political game, where issues are needed to be set on an agenda, support must be found to enact laws, and actors are needed to be mobilised to implement them. Again, in context of Europeanisation, ESF may serve for ideas to be put on the agenda, solutions to be enacted, and financial means to mobilise local or regional actors to implement these. However, European ideas or instruments introduced to induce domestic change are often object of fierce political debates in national politics. The perceived political misfit between domestic and European levels, may or may not influence the likelihood of changes occurring in the national context(see i.e. Falkner, Treib, Hartlapp and Leiber, 2005 for differences between MS’s compliance cultures regarding to EU’s regulations). Based on extensive literature on consensus hypothesis (see i.e. Mailand, 2008), it is however reasonable to expect that:

H2:Domestic change - catalysed by Europeanisation - will be more likely to happen in a country where political fit is perceived to be larger than in a country where it is lower.

In other words, the similarity of political goals between EU and national level would explain variation in the degree of Europeanisation in the country. In the next section, we will formulate some country specific assumptions derived from the theoretical discussion above.

1. Methodological notes

As argued in the introduction, research on Europeanisation is by no means a simple exercise and the findings on Europeanised effects are mixed to say the least(Haverland, 2006). Rather than attempting to capture the ‘net impact’ or the extent to which ESF interventions have steered domestic policies, we seek for catalysing effects and mechanisms behind these effects. We follow Verschraegen et al.(2011)by attempting to highlightcertain effects and their mechanisms of Europeanisation through the ESF by contrasting theirfindingson the test case of Belgium with ours from the Netherlands and Spain.

In comparison, the two countries are potentially different (The Netherlands) and similar (Spain) to Belgium. The Netherlands is a centralised unitary state, wherethe ESF monies are redistributed by the central authority (ESF Agentschap) directly under the supervision of ministry of social affairs and employment, and the 431 municipalities make the largest group of potential beneficiaries of ESF monies. Spain, on the contrary, has a similar administrative structure as Belgium, where the (quasi-) federal state appropriates competences to regional and local levels to organise reintegration policies. Here, the ESF is subject to the division of power between the central state and the 17 Autonomous Regions (CCAA), where the central state, as well as the CCAA, are distributing their appropriated ESF monies. The ESF budgets for these two countries vary considerably: whereas the budgets for Spain in the Programming periods (PP) laid at €8.89 bil.(1994-1999)(GHK, 2003), €11.9 bil. (1999-2006) and €8.1 bil. (2007-2013), the consequent budgets in the Netherlands were€1.8 mil. (2000-2006) and only €830.000 in the subsequent period (2007-2013)(European Commission, 2011).

The countries thus present a good empirical case to investigate our research question andare fruitful test cases for our hypothesis on the conditions on when Europeanised reforms are more likely to occur.

It is widely observed that the Netherlands is relatively far ahead with reintegration policies(van Gerven, 2008). This implies that, in case of the Netherlands, a rather good institutional fit to EU reintegration policies can be found, whereas Spain considerably lag behind in this area(Guillén and Álvarez, 2004, Kluve et al., 2007). Accordingly, we assume that domestic institutional misfit is considered (by our respondents) to drive more Europeanisation of reintegration policies in Spain than in the Netherlands.

Secondly, our expectations further emanate from the different amounts of ESF money available for each country. Since the Netherlands receives the smallest amount of ESF monies (€830,002,737 ≈ 0.02% of GDP)[1] and Spain the largest (€8,057,328,822 ≈ 0.11% of GDP), (while Belgium lies with €1,073,217,594 ≈ 0.04% of GDP in between), we expect that the change of reintegration policies, due to high availability of ESF monies, will be considered to be credited more strongly to ESF (than national politics) by the Spanish respondents than their Dutch colleagues.

With regard to the perceived political misfit between domestic and European levels, where EU pro and -sceptic attitudes play a major role concerning the willingness to learn and change, we expect that a country such as Spain, with pro-European attitudes and rather long lasting underdeveloped integration policies(Aragón, Rocha, Santana and Torrents, 2007), has more to learn about activation than the Netherlands, and therefore, we assume thatSpanish actors perceive their political misfit stronger than the Dutch and are more eager to ‘learn’from European governance than their peers in the Netherlands.

Finally, it is expected that the ESF drives innovation in governance especially at lower levels of admin and provides these actors with opportunities to use the fund strategically as well as with obligations to soundly manage these finances, and therefore we expect that Spanish respondent (at regional or local levels) will strive to executeEU driven governance reforms more than their colleagues in the Netherlands.

Data

The data of our research consist of semi-structured expert interviews. A total of 10 interviews were conducted with one or more respondents in the Netherlands at the central state level (The Hague, Brussels) and at the local level (Rotterdam, Amsterdam and Enschede) between 2009 and 2011. A total of 11 interviews of ESF experts were conducted in Spain at the central state level (in Madrid), regional (Catalonia) and local level (Barcelona) in 2011.In general, the profile of the interviewees is orientated on heterogeneity and to be adequately representable for the interviewed persons in Belgium. An anonymised list of interviewees is indicated in Appendix 1. Next to interview material, other data was analysed, such as national official documents, evaluation studies both at national and EU level, academic literature etc. We focused on the ESF programming periods 1994-1999, 2000-2006, and 2007-2012.

1. Innovation through the ESF in the Netherlands

4.1. Leverage effect in innovating activation instruments

At least among the Continental countries, the Netherlands has been described as one of the pioneers in activation. With regard to the good institutional fit with the EU guidelines, and a rather low numbers of unemployed (compared to EU average), the pressures to change the reintegration policies has been rather low since the start of the new millennium. The Europeanisation effect was therefore considered as being modest, if any, by our respondents.

Most respondents acknowledged ESF having a catalyst impact on activation, but in their view, it had only contributed to the innovative progress of turning Dutch reintegration policies from substantial to more substantial (NL/SZW). Rather than innovating with ESF money, the Dutch seem to emphasise the appropriate use of the money.On several occasions, domestic actors involved in negotiating the ESF priorities for the programming period have tried to stretch the national objectives of ESF to allow them to redistribute this money according to domestic wishes. Despite the formal focus on reintegration of the inactive appropriated in the EES guidelines, those involved in the ESF at the national level for example strived to create sufficient room for implementing policies for the integration of workers (NL/EC2, NL/SZW1, NL/ESF1). By posing broad formulations of policy priorities and using as many container concepts as possible, the Dutch actors have tried to enable the use of ESF by the so-called O&O funds; sectoral education funds based on collective labour agreements. Similar attempts were noted for the current programming period, when money was earmarked to specific categories, persons aged 55 or older, the inactive (women) without right to social assistance (NUGGERS) and the work incapacitated, namely to reintegrate the ‘difficult’ groups. Again, attempts were made to broaden the priorities and to allow to use the money also to O&O funds, but they remained unsuccessful(NL/EC2, NL/ESF1).

Some leverage effects were identified by our respondents. It were the O&O funds,in fact, that were indicated by our respondents (regardless of their position) as the main channel of innovation put forward through the ESF (NL/SZW, NL/EC2, NL/ESF2, NL/E). Originated from the famous tripartite Wassenaar agreement (1982), these education funds provide financial means for (re)training of workers. In 1994, coinciding the start of the ESF financing programme (1994-1999), the Dutch government intentionally steered the extension of the O&O funds from the traditional industries (metal, building) to new sectors such as ICT, care, and flex workers (NL/SZW, NL/E).In words of one of our respondents (NL/ESF1) ‘In last decades, the labour market in the Netherland has become considerably narrow and the need of re-training has become crucial…ESF has contributed to extending financial means for these workers (in certain sectors) and enabled us to keep them vital and up-to-date’. Again, only a facilitating effect was given to ESF, but consensus that ESF contributed to the institutionalisation of these funds was shared by most of the people interviewed.