The European social model: Key to competitive growth?

The European Foundation for the Improvement of Living and Working Conditions was established in Dublin in 1975. Every four years, Eurofound hosts the high-level Foundation Forum in partnership with the Irish Government. This year the Forum takes place as geopolitical shifts ripple across the globe, climate change, AI and digitalisation alter life and work as we know it, and the EU's global competitiveness is in the spotlight. How to face these challenges and leverage the opportunities, all the while protecting and promoting the working and living conditions of EU citizens, is the critical question. Is the European Social Model the answer? 

1975 was a period of economic stagnation across the western world. The post-war economic boom had slowed, European economies were grappling with stagflation, female employment was at just 27%, and life expectancy just 71 years. To ensure better and more harmonised development, EEC leaders launched the European Regional Development Fund to transfer resources from rich to poor regions—to improve infrastructure, attract investment, and create jobs—and established the first Social Action Programme. From this, Eurofound was born, one of the first EU specialist agencies aimed at actively supporting better lives for all Europeans. 

Since then, the economic, social and political context has continued to change dramatically up to today. 

The priorities outlined in President von der Leyen's State of the Union address(opens in new tab)This link opens in a new tab reflect an ambitious EU response, specifically the increasingly urgent drive towards greater competitiveness. The recent Draghi report(opens in new tab)This link opens in a new tab pinpointed the gaps in the Union's 'competitive genetics'—citing a broad range of items to be tackled from energy to capital, investment to simplification. So yes to greater competitiveness and growth for a prosperous future EU. 

But will this come at a cost? Against this background, do the core European goals of improving living and working conditions and ensuring greater equality between regions and Member States risk slipping down the agenda? 

From the outset, as explicitly stated in the Treaty of Rome, European integration included fundamental social objectives. Economic progress coordinated at EU level would drive social prosperity to support the creation of more equal societies, combat poverty and exclusion, and lead to the improvement of living and working conditions for all. Driving social progress across the EU has been supported by a host of EU initiatives from funding to soft law, common goals and directives. But is this still possible in the current context? 

How can we achieve the parallel EU priorities—consolidating the European Pillar of Social Rights(opens in new tab)This link opens in a new tab, enhancing skills, addressing housing, promoting equality, ensuring quality jobs, and combating poverty—and ensure accelerated productivity, growth and security in a global context? 

This is where the European Social Model could hold the key. 

The European Social Model is perhaps the essential and most distinguishing element that Europe possesses to deliver sustainable competitiveness and economic growth while maintaining social cohesion. Some disagree, of course, but for the most part, it is generally recognised as a foundational asset that provides a distinct competitive advantage, not merely a compensatory mechanism but an active enabler of sustainable economic performance and social cohesion. The European Pillar of Social Rights conceptualises social investment as a productive factor, yielding returns that are measured not just in social well-being, but in hard economic data: higher GDP, lower long-term state costs, and a more competitive European Union on the global stage. It also provides a comprehensive set of institutions and policies designed to go hand-in-hand with economic growth—to ensure growth is both equitable and inclusive. 

In essence, the European Social Model fosters a 'virtuous circle' where social investment leads to a more skilled, healthy, secure, and engaged workforce, which unlocks resources from within and in turn drives higher productivity, greater innovation, and enhanced economic stability. This creates a compelling environment for investment and growth, contributing significantly to both economic growth and convergence across Member States by ensuring the benefits of prosperity are more broadly and equally distributed. 

Because what is clear is that the requirements for true competitiveness today are multidimensional. They are not reserved to one sector or policy; there is no silver bullet. It is not all about economics, nor is it just about tariffs and trade. 

True competitiveness demands better jobs and a skilled workforce—one able and willing to work in the sectors required, and actively tuned in to digital developments and AI. This requires well-functioning social dialogue at all levels, a labour market unhampered by structural inequalities: one that embraces diversity, supports those with disabilities, integrates migrants, ensures a human-centred approach in the deployment of AI(opens in new tab)This link opens in a new tab, and promotes lifelong learning for workers of all ages. Competitiveness means removing the obstacles to labour market access by improving public service delivery, ensuring affordable housing, providing childcare, alleviating poverty, and investing in communities and social capital. It means expanding access to work to include the growing number of older workers. Ultimately, it means rooting out corruption and protecting democracy, alongside better, more sustainable production, clean technology, innovation, creativity, and strength.