Each year, the European Commission prepares a Country Report for each Member State within the framework of the European Semester. From the point of view of the Chamber of Labour, the current Report for Austria, which was published on 27 February 2019, includes several critical assessments by the Commission, but also contains a number of aspects, which have been raised by AK for years.
The European Commission has been generating the European Semester since 2011 in order - against the backdrop of the Financial and Economic Crisis 2008 - to improve and better coordinate the social development of the Member States. Key components of the European Semester are the annual Country Reports, from which subsequently country-specific recommendations are derived. AK EUROPA gives an overview of the most important findings of the current Report for Austria:
The Commission establishes that even though the situation on the Austrian labour market with regard to employment and participation rates has been constantly improving, there is nevertheless a substantial pay gap between men and women. This is particularly due to the fact that the share of part-time employed women in Austria is especially high. The reason given is the fact that there are not enough childcare facilities for children under three and that those that exist are unequally distributed within the country. Subsequently, women are disadvantaged in respect of pensions, which is why women over 65 are exposed to a higher risk of poverty and social exclusion than men.
The Commission confirms that Austria with regard to pension expenditure continues to be a “medium risk” for the sustainability based on public finance. Hence, it assumes that public expenditure for pensions will have risen from 13.8 % to 14.3 % by 2070. Even though it only calls this rise moderate, it however already regards Austria as a country having the highest pension rates. The European Commission had already taken this view in previous years, which led among other to its proposal that Austria - within the scope of the country-specific recommendations - would raise the legal retirement age. From the point of view of the Chamber of Labour, this recommendation must be clearly rejected, as an active labour market policy can increase the employment rate, thereby ensuring more contributors to the pension system, which in turn secures the latter in the long run.
Integration of the social partners
The Commission also comments on the integration of social partners in Austria: hence, it states that the new government “has put the established system of social dialogue and integrating social partners in the decision-making process to the test”. It conforms that the Austrian social partners have the “proven capability” to contribute to a balanced socio-economic development. The Commission voices concerns whether the social partners were adequately integrating in developing the reforms, which were implemented over recent months.
Thanks to high private consumption and investments, Austria’s GDP 2018 grew by 2.7 %. However, the Commission assumes a fall to 1.6 % for the next two years. The share of foreign currency loans has further declined, shall, however, continue to be closely observed. The closing of wind-down entities, which were set up during the financial crisis to manage bad loans, is moving faster than expected. However, from Commission’s point of view, the requirements for working in key trades and professions are still strict and in its opinion inhibit investments, the creation of new jobs and the innovation of companies.
In respect to future tax reforms, the Commission recommends a clear redistribution of the tax burden - away from the factor ‘work’ - which currently shoulders 55.3 % of the tax revenue - and towards "more growth-friendly sources of income": the Report says that in view of the high wealth inequality in Austria, for example a higher real property tax or the reintroduction of the inheritance tax and the property tax would provide potential for redeployment. According to calculations by the Commission this might generate an income of 2.7 and 6.3 billion euro!
This is of great significance, as Austria with regard to property tax is one of the taillights in OECD comparison. However, the wealth of the top percent is continuing to grow. The top 1 % in Austria almost holds 40 % of the total wealth. In contrast, the poorer half of Austrians only possesses 3.6 % of the wealth. In addition, the current wealth census by ÖNB (HFCS) shows that inheritances are even more unequally distributed than wealth overall. Only about two fifth of Austrian households have (so far) received an inheritance. Most have inherited relatively small amounts, whereas only a few have inherited large wealth.
The Commission has also examined property prices within the scope of the Country Report: apart from purchase prices, rents have also increased above average, headed by Vienna where prices have risen by 50 % since 2005. It regards this price increase as a problem in particular for the capital, as rented property accounts for three quarters of the Viennese market. Above all, the increase in cost was also the rise of the share of privately financed flats. The Chamber of Labour has for a long time referred to the rising housing costs in Austria’s cities and demands measures to make living in urban places affordable again.
The Report also addresses aspects of energy supply, air pollution and circular economy. Austria is running the risk of missing climate and energy targets with regard to energy efficiency and reducing greenhouse emissions by 2020; the reason for this is an increase of emissions in particular in the transport sector. In particular in urban areas, it regards congestion and air pollution as a big challenge. Thanks to high recycling rates, the circular economy is on a good path; at the same time, however, the Commission misses an overall strategy to improve the use and the process of recycling materials.