US pioneers show EU how it works

Date: 26/02/1998

By Simon Coss

THE EU must do more to create a true culture of entrepreneurship if it wants to match the United States' record on job creation, warns US Labour Secretary Alexis Herman.

Herman, in Brussels last week to take part in a symposium on the problem of child labour, told European Voice that the Union had a long way to go before it could claim to match the US' record in encouraging new business start-ups.

"I think in the United States we have probably done a great deal more, in comparison to Europe, to stimulate entrepreneurship, just in terms of the culture - both through our policies and raw numbers of small businesses that have been developed," she explained.

Herman argues that US President Bill Clinton's strategy of providing support for people who want to start up small or medium-sized enterprises (SMEs) has paid dividends in the fight to reduce unemployment on the other side of the Atlantic.

"He was very effective at supporting our small-business strategies because that is where over 70% of jobs have been created," she said.

The basic thinking which underlies US policy towards SMEs is that as many people as possible should be encouraged to go into business.

That way, even if the majority of new ventures fail within their first year - as statistics consistently show they do - the minority of businesses that survive and prosper still represents a sizeable section of the nation's employers.

But for such policies to work, small and medium-sized businesses need ready access to start-up and venture capital. This in turn requires a banking culture where financial institutions are not averse to providing money for potentially risky ventures.

But one thing for which European banks are not renowned is being adventurous.

It was partly in an effort to encourage them to change their notoriously conservative lending polices that the European Investment Bank (EIB) announced at last November's jobs summit in Luxembourg that it would make an extra 1 billion ecu available to help SMEs gain access to start-up and venture capital.

While this demonstrated that the Union's finance ministers - who are the EIB's governors - realised there was a problem, it is debatable how much difference the money will make once it has been spread out across the Union's 15 member states.

Herman's warnings about the need for a change in attitudes towards small businesses in Europe are echoed by organisations representing the sector. They have repeatedly complained that, while their sector is seen by governments and EU institutions alike as providing an answer to the problem of the Union's 18 million jobless, when it comes to the crunch, politicians still favour established big businesses.

The European Union of Craft and Small and Medium-sized Enterprises (UEAPME) argues that this not only hinders its members' efforts to get Europe working again, but also flies in the face of statistical evidence.

"In the EU, there are some 13,000 big businesses which, during 1992-93, axed some 1 million jobs. SMEs, on the other hand, created 2.6 million jobs between 1988 and 1993. SMEs in the EU employ more than 70 million people, that is to say 70% of the working population. Micro-enterprises (0-9 employees) employ more people than big industry," said the organisation in a recent report.

But it is not only a change in attitudes towards small businesses and the self-employed which is required in Europe, argues Herman. There are other labour market reforms which could also play a part in reducing the length of EU dole queues.

The labour secretary notes that it is still a very difficult and time-consuming process for people from one EU member state to seek and find work in another.

Despite the fact that Europeans are supposedly living in a single market, those who have tried to exercise their right to move around the Union in search of employment discover all too often that settling and working in another EU state can be a bureaucratic nightmare.

Communication between different national and local authorities is often very poor, and the lack of any mutually agreed system of identity cards means that residence permits which are valid in one member state are often worthless in another.

"I believe that unifying systems, whatever they are, is helpful in terms of bringing about better integration," said Herman.

The labour secretary believes, however, that there are some areas where the Union has made advances from which her country could learn.

"I think what you have done with your part-time workers' rights and some of your job-sharing schemes has been very useful for us, in terms of looking at the European model," she said.

But when it comes to perhaps the most controversial job creation strategy currently being pursued by an EU member state, namely the French government's decision to reduce the working week to 35 hours, Herman diplomatically suggests that this is one idea she is unlikely to be taking home with her.

"I think the goal is important and then let's talk about the means," she said. "Are we clear that 35 hours in terms of the working week achieves the goal of job creation?"

Interview with US Labour Secretary Alexis Herman.