The Political Economy of Social Europe after Brexit

Most discussion of Brexit’s social aspects so far has focused on the United Kingdom- what led to the vote and what will be its implications for the UK? The implications of Brexit for the rest of the EU are far less explored. This chapter focuses on one of the key issues for many voters, namely the future and meaning of “social Europe.” It focuses on the interplay between two issues: the broader political economy of social policy in Europe, and the changing balance between social models among the remaining 27. Data on migration in key workforces show that in key social sectors such as higher education and health professions the UK has been a major importer of skilled labor, benefitting from a labor market closer to the 500 million of the EU than its own population and from the dysfunctions of public sectors in other EU member states. This pattern of hiring means that Brexit might be highly disruptive to the UK’s social sectors and their success. It also will disrupt European labor markets in these areas, and could both limit “brain drain” that is problematic for some countries and potentially be negative-sum for the continent if the result is skilled workers who are underemployed when they are in systems outside the UK. Politically, there will be three structural changes. First, the UK is by far the largest economy that does not rely on statism or social partnership models, and without the UK there will be a preponderance of countries that use forms of neocorporatism as well as a greater role of the state. This might change the essentially regulatory, “Eurolegalistic,” approach of EU law in social policy. The second stems from the fact that much EU social policy is essentially a regulatory outgrowth of economic policy, and EU economic policy is more and more driven by Eurozone agendas. Further, the EU’s fiscal governance system, still largely untested and not guaranteed to work, builds austerity into fiscal and public policy decisions and has led to a focus on neoliberal “competitiveness” measures. Given this context, the future of EU social policy will be shaped by the loss of the UK as a pillar of a “northern” block of states with liberal preferences for EU law, fewer strategic options for Germany and more power for France, even more marginalization for the preferences of non-Eurozone states, and a potential shift towards more of a reliance on social partnership and managed markets in EU law. The result should be to put competitiveness, austerity, and regulatory approaches under considerable pressure.