In the East, many EU work rules don't apply

WARSAW The European Union has many pages of laws on working conditions and working time, but none of those rules apply to people like Monika Murawska, a 36-year-old English teacher who has taught at the same private school here for more than a decade. Or to Krystyna Roslan, a 54-year-old mother of two who has worked as a proofreader for a men's magazine for five years. Murawska and Roslan are among an estimated half million people in Poland who work in an office and have a boss but who are, technically, independent contractors. They are not eligible for vacations, sick days, overtime or maternity leave. Researchers say this type of working arrangement is one of the innovative ways used by companies in the former Communist countries that joined the European Union last year to skirt EU and local workplace rules. "They implemented on paper all the EU regulations," said Daniel Vaughan-Whitehead, a specialist on Eastern Europe at the International Labor Organization in Geneva. "But when we look at the reality on the company level, we see a gap." At a time when the European Union is divided politically over its proposed constitution, there is a widening rift between the freewheeling and free-market Eastern European countries and Western European states where social benefits have become a way of life. Countries like Poland, Slovakia and Estonia continue to evolve toward American-style economic systems of low taxes, low trade union membership and low social benefits. Leading politicians in Poland, by far the largest new member of the EU, are proposing the introduction of a single rate for income, sales and corporate taxes, similar to what Slovakia has done. The rate has not been decided yet but it could be as low as 19 percent. Janusz Grzyb, a deputy director in the European affairs department of the Polish Ministry of Economic Affairs and Labor, speaks derisively about the "social models" of Western Europe. "Europe needs more flexibility in its labor market," Grzyb said in an interview. "Our mentality is survival." And survival means working harder than Western Europeans. Workers in the 10 countries that joined the EU in May 2004 work on average almost three weeks more per year than workers in Western Europe, according to study released last month by the European Industrial Relations Observatory, a research body financed by the European Commission. Before last year's expansion of the EU, bureaucrats in Brussels sought to mold the Eastern European candidates in a Western European model, with trade unions and employers associations engaged in "social dialogue." Yet while unions were useful in bringing down Communism in Poland, today they are close to irrelevant, shedding members to the point where the percentage of unionized workers is generally closer to the 12 percent level in the United States than the 30 percent average in Western Europe. Perhaps the most striking divergence between East and West in the EU today is the use of innovative working arrangements. In Poland, the number of employees who are technically independent contractors appears to have remained steady in recent years. But in other countries in the region, the use of this type of contract has increased sharply. For instance, in Estonia in the past four years, the number of self-employed people in the service sector has increased 62 percent, according to Eurostat; in Slovakia, the recorded rise is 40 percent. Self-employed people can surpass the EU's weekly working limit of 48 hours because the labor code does not apply to them. (The EU's so-called working time directive, which dates to 1993 and is undergoing revision, also does not apply to managers and a few other categories of workers.) Stéphane Portet, a visiting researcher at the University of Warsaw who has studied the self-employment trend, says surveys of companies suggest that 500,000 people work this way in Poland, a country of 38 million people, but that the number could be much higher. Companies like the system, he said, because it provides them with the ultimate power over whether and when they want to hire and fire. "The question of decent work or the quality of employment is not important in a country where 37 percent of those under 25 do not have a job," Portet said. For Western Europeans, the easterners' creative ways of skirting EU law amount to "social dumping," a term used by trade unions and politicians in the West that implies the erosion of social benefits and labor codes through external competition. "They are supposed to implement the same regulations, but if they circumvent them they gain competitiveness," said Vaughan-Whitehead, who recently published a report, financed by the European Commission and International Labor Organization, titled "Working and Employment conditions in the New EU Member States: Convergence or Diversity?" Vaughan-Whitehead cites a survey of Hungarian employers in which 46 percent said they paid part of their wages to employees under the table to avoid taxes and social charges. "If this becomes a long-term problem it will create tensions within the EU," he said. "There could really be a race to the bottom." The new EU members are hardly the only countries where companies seek ways around labor restrictions. Spanish firms use temporary work contracts to maintain flexibility, and Italy has a massive market for undeclared work. The main difference appears to be that Eastern European countries are working harder and longer to bridge their income gap with the West. Portet says that the legality of substituting independent contractors for regular employees in a country like Poland is questionable, but that the practice is rarely challenged in the courts because it benefits both the employer and the workers, who pay a lower tax rate. Murawska, the English teacher, would rather be self-employed. "I like the independence," she said. She is paid the equivalent of €10 an hour, cash, and left to figure out mandatory medical insurance, retirement savings and the like. Roslan, the proofreader, says the system works well for her because she is eligible for a state pension from a previous job, but she worries about others. The self-employment system favors the aggressive and outgoing, she said. "I have a wider perspective because I have children," she said. "If young people don't have an entrepreneurial streak they find it every difficult to find a job." She added: "Not everyone is an entrepreneur."